Hard-hit businesses owners across the country – still reeling from the pandemic – are facing a new and unexpected obstacle that may determine whether their businesses will survive.
Hundreds of companies are getting ready to square off in court against the insurers that have already denied their business interruption claims, claiming losses caused by a virus are not covered.
Dr. Robert Klein says the interruption of his dental practice was disastrous, to the tune of $1.2 million in losses.
“We have over 10,000 active patients,” Klein said. “And we shut three offices down completely on March, the 17th.”
Government guidance gave him no choice: from the U.S. Centers of Disease Control and Prevention to the American Dental Association, dentists had to shut down.
“We're working directly in the mouth. So we're a very high risk community,” Klein said.
Klein said he worried about his patients and his furloughed employees, but had no doubt his insurance coverage would help them all get back up and running. Until his first conversation with his broker:
“And the response that I received was, there's no way we can cover that. It would bankrupt us,” Klein said.
His attorney, Bob Langdon, calls the insurers denial a broken promise.
“You pay premiums all the time. And then when you need it, they’re all denied,” Langdon said.
Langdon says his Kansas City firm has now 500 cases like Klein’s.
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“We represent universities cities, doctors, restaurants,” Langdon said. “I mean they're just saying there's no coverage. We're not paying, we don't care.”
Dr. Klein’s complaint against his insurer, Auto Owners Insurance, accuses it of failing to pay his claim even though his policies do not have virus exclusions for pandemic-related losses. Some insurers have written that express exclusion. Auto Owners did not answer our requests for comment.
The battle over blanket denials is now playing out with insurers nationwide:
From a California lounge owner who said: “We made a claim on our business interruption insurance, and it was denied.”
To the proprietor of a Washington, D.C. restaurant who said: “We are suffering and we paid into the policy, and then saying this is not covered. In my view that’s what insurance is for.”
The insurance industry has a very different view. Its trade group maintains a global pandemic cannot be covered.
“The legal precedent has been set that viruses and bacteria do not cause that direct physical damage, and as such, it can’t trigger a claim,” according to Insurance Information Institute CEO Sean Kevelighan.
A situation that Klein says begs the question: “Why am I paying my premiums?”
The same question is very much on the mind of so many other business owners who paid premiums for years, hoping they’d never need it, but confident it would be there if they did.
“Why are they collecting trillions of dollars in premiums annually, when you know and they're just blanket denying a valid claim?” Klein said.