Challenging Insurers’ Denials Of Business Interruption Insurance Claims In Wake Of COVID-19

Editor’s Note: Zarco Law is at the forefront of challenging insurers’ denials of business interruption insurance claims that may come in the wake of COVID-19.

COVID-19 has thrown our way of living into treacherous and unchartered waters. With each passing day, the scare of this novel virus is causing our emotionally-charged government officials at every level to react with decisions that effectively strip our ability to work, shop, play and interact normally in order to slow or prevent the spread of this viral outbreak while causing economic mayhem. The effects of this new-normal can, at a minimum, last weeks but most likely several months. However, challenges in wake of the current situation to people’s livelihood could easily last for years!

insurance claims - shutterstock_190551659Photo Credit: Shutterstock

The nationally renowned and highly experienced business litigation and trial attorneys at Zarco, Einhorn, Salkowski & Brito are here to help you navigate the legalities from the economic fallout caused by the turbulence of these previously unchartered waters. We recognize that the impacts are severe and broad, with potentially deep lasting impact to your ability to survive financially the resulting effects that are no fault of your own.

Business & Financial Hardship:

The Government’s utilization of its Civil Authority to force shutdowns of our entire way of life and ability to operate our business is having a major impact on our life savings, businesses’ bottom lines, and our ability to follow through on our contractual obligations to our business partners. This ripple effect includes the requirement of closing our businesses, creating an absent and fearful workforce with obligations for their employees’ compensation, disruption of supply chains, cancellations of reservations and bookings, relying on previously rare and somewhat untested technologies to work virtually and remotely, and so much more.

Businesses are undoubtedly stressed to find ways to manage decreased cash flows and stop the bleeding losses to recoup or minimize the damage for their losses of income, assets, and brand value during and in the aftermath of this unforeseen ‘tragedy’. What follows is a discussion of some but not all of the legal principles that may come into play as we consider a multitude of legal arguments and strategies we have used over the last 35 successful years in practice to protect the economic interests of our clients as it relates to their contractual and other business obligations.

Business Interruption Insurance (aka Income Loss Insurance):

This very important type of coverage in an insurance policy is crucial and intended to cover for lost income sustained as a result of a covered peril in order to allow for the continuity of your business into the future. Even when specific Exclusion language exists in a policy that makes the case seem completely defeated and untenable, our talented and creative team is armed with legal arguments that will help us navigate through the treacherous waters of obstructive defenses created by the insurance companies seeking to escape their contractual obligations. Each case may differ based on specific policy language which requires a skilled, experienced, and creative attorney to interpret; that’s where our team of attorneys come in and shine as our track record proves.

Civil Authority coverage, for instance, applies when a local, state, or federal government mandates to limit access to any aspect of your business which is critical to a business owner’s ability to conduct his normal operations. Contingent Business Interruption Insurance is when the loss is indirect as caused, for instance, by the inability of a supplier to perform his obligations with the Insured (business owner) due to no fault of his own as considered covered by the business owner’s insurance policy. Both of these principles will play a huge role in navigating the contractual obligations and legal strategies that will recover the loss of revenue as well as the expenses required to pay during this crisis.

Impossibility of Performance and Frustration of Purpose

Under the contract doctrines of Impossibility of Performance and Frustration of Purpose, a party is discharged from performing a contractual obligation due to no fault of their own, it is impossible or futile to perform, the party could neither have foreseen the risk at the time of entering into the contract, or could they have prevented the event(s) in question from occurring in the first place. These and other legal doctrines provide legal defenses for business owners to not have to continue to perform their contractual obligations. Although business owners have the responsibility to MITIGATE or take reasonable steps to reduce the damage as reasonably possible, these doctrines provide much-needed protection. In other words, most contracts contain language that requires the party to take proactive steps to meet and perform their contractual obligations with prudence, diligence, and care by reasonable efforts subject to the above defenses.

Force Majeure (Acts of God)

Force Majeure is a defense to contractual obligations to perform and arises when parties cannot reasonably foresee nor control an event, which prevents either party to perform their contractual obligations. An Act of God may be considered as force majeure; it refers to a [natural phenomenon that is exceptional, inevitable, and irresistible, and which its effects could not be prevented or avoided by the exercise of due care or foresight.] (Black’s Law Dictionary 11th ed. 2019) It stands to reason that businesses would not have the ability to prevent the COVID-19 outbreak by reasonable care or foresight. In fact, the Director-General of the World Health Organization on March 2, 2020, in a media briefing said “We are in unchartered territory. We have never before seen a respiratory pathogen that is capable of community transmission, but which can also be contained with the right measures.” This is where the various governmental entities stepped in to mandate by civil order quarantines, lockdowns, and business closures in attempts to prevent the spread of the virus and shorten its life cycle. The punitive measures imposed upon us all include the required closure of businesses, imposed travel bans, etc. Clearly, none of this is within the control, fault, or negligence of the businesses gravely affected, but instead a government imposition of its civil authority for the benefit of the communities at large. In essence, the existing contractual obligation(s) between the parties renders such requirements objectively impossible to perform.

Robert Zarco Haute LawyerPhoto Credit: Michelle Lawson

Contact Us Now:

Zarco, Einhorn, Salkowski & Brito is currently working on these and other litigation matters arising from this pandemic for our clients. We want to hear your circumstances right away to offer you creative solutions to solve your legal business challenges and needs during this frightening period! Time is of the essence! It is always best to be prepared and seek our legal guidance prior to contacting your insurance company and making a claim! Recognizing the financial need of our clients, Zarco Law will be handling cases on a primarily contingency basis in addition to a small upfront fee. We offer a free initial consultation. Give us a call at 305-374-5418 or contact Robert Zarco immediately by email at to discuss your options and to enhance the likelihood of obtaining a successful outcome for your business.

For more on Robert Zarco and how he and Zarco Law can help with your insurance claims, visit his Haute Lawyer profile.