Reardon Anderson - April 2020

What Is Business Interruption Insurance?


Business interruption insurance is designed to replace lost income and pay extra expenses when the operations of a business are disrupted. Typically, business interruption insurance is part of a business owner policy (BOP). The amount of coverage for business interruption is found in the declaration page of the insurance policy. In order to receive these benefits, there must be a covered loss. Generally, covered losses that would trigger business interruption coverage include fire, wind damage, storm damage, water leaks, theft, and falling objects. If the operations of a business are disrupted by a covered loss, the insured party would be responsible for establishing the losses sustained while not being able to operate (or while operating in a reduced capacity). Potential benefits under the business interruption coverage include loss of income/profits, mortgage/rent, utilities, payroll, and relocation fees. In light of the COVID-19 outbreak, many businesses are either totally closed or operating at a reduced capacity. The businesses that purchased business interruption coverage may be looking to their BOP, but unfortunately, many such insurance policies have an exclusion for damages caused by a virus. Additionally, such policies usually require direct physical loss or damage to covered property (think a building burning to the ground). In response to the COVID-19 outbreak, it is likely that many insurers will deny coverage because the loss was caused by a virus (SARS-CoV-2 specifically) and there was no physical loss or damage to the covered property. In response, the New Jersey Legislature has proposed a bill to “lift” this exclusion for certain businesses. Additionally, it should be noted that following 9/11, Congress passed legislation to support insurers who provided coverage for acts of terrorism. It is possible that legislation may be enacted to modify policies and/or coverage positions of insurance in the coming weeks and months. Additionally, depending on the specific wording of a policy, business interruption coverage may be available.

The majority of civil cases heard in the New Jersey Superior Court involve disputes where a plaintiff claims to have been injured by the actions of the defendant and seeks monetary compensation. Examples of these cases can include contract disputes, car accidents, and malpractice actions. The civil division of the Superior Court is separated into three sections — the Law Division, the Special Civil Part, and Small Claims court. LAW DIVISION

When the amount in controversy is in excess of $15,000, the matter is heard in the Law Division of the Superior Court. Cases filed in this division generally take longer to resolve because more intensive discovery is allowed. SPECIAL CIVIL PART If the amount in controversy is between $3,000 and $15,000, it is heard in the Special Civil Part of the Superior Court. It's the court's goal to try to resolve these matters within 90–120 days of the complaint being filed. SMALL CLAIMS If the amount in controversy is under $3,000, it is heard in the Small Claims part of the Superior Court. These cases are generally resolved the fastest in the civil court system.

Should you have any questions about business interruption coverage, please give us a call.


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