With the spread of COVID-19 in Louisiana, the governor has ordered business in Louisiana to close or greatly reduce operations. Many business owners have obtained insurance in order to protect their companies from losses associated with business interruptions. This coverage may be something you specifically requested, or may be included as part of your broader commercial insurance policy. The key question for all business owners is whether interruptions caused by the pandemic and associated restrictions are covered losses under your insurance policy.

As always, the first thing to do is look at your policy language. The insurance policy is a contract and the language of the contract will generally control what is included and excluded from coverage. As long as the language of the contract is not ambiguous, or does not contain an ambiguity that cannot be resolved through the general rules of interpreting contracts, it will be considered the law between the parties. Should the contractual language remain ambiguous after the application of the rules of contractual interpretation, the contract will be interpreted generally in favor of the insured; however, the ordinary meanings of the words may not be stretched to create an ambiguity in the language where none exists.

Many of these policies articulate what constitutes a business interruption, such as an inability to open due to a fire, natural disaster, or some other expressly covered loss. Further, the policies are often written in a manner that such an interruption must be accompanied by some physical damage to the business premises. As such, many of these policies were not drafted to include interruptions and losses caused by a closure due to public health concerns or a pandemic. However, it may be that your policy is unique or otherwise subject to interpretation.

Regardless of whether you think your coverage expressly provides for such a circumstance, you should be diligently documenting your losses. Your business interruption coverage is not likely to cover losses related to economic circumstances, such as the drop in oil prices. As such, you should separate losses attributable to economic circumstances from losses directly attributable to the pandemic as much as possible.

Similarly, you should become familiar with your claims process. Should you determine it is in your best interest to file a claim, be prepared for the real possibility that the insurance company will deny your request. If you are uncertain about your coverage and likelihood of success on a claim, an experienced attorney will be able to help you interpret your policy language in light of the relevant Louisiana law to help you fully evaluate your next steps with the insurance company.

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.