Small business owners forced to cease operations because of an unpredictable disaster may turn to insurance carriers for relief. Policies containing business interruption coverage, however, may reimburse claims only for “direct physical loss or damage,” as noted by the American Bar Association.
Denied claims may allege that policyholders do not qualify for coverage because the unpredictable damage did not result in a direct loss of property. A carrier may also attempt to deny a claim based on an exception written into the policy.
Coverage for property loss or damage
Some carriers may cover direct damage to a building's structure. The policy's language may describe reimbursement of “extra” expenses during an interruption that requires repairs. After a prolonged suspension, an owner may need to expend resources to restore the premises back to its normal operations, which a policy may reimburse.
An approved extra expenses claim could compensate an owner for the loss of revenue experienced during the restoration period. Some policies may include expenses for fixed costs that remain constant, such as licenses, utilities, and software subscriptions. The period covered, however, may have limitations.
Coverage for disasters or health-related issues
The aftermath of a disaster could cause serious damage to the health and safety of a business's customers and employees. An insurance policy may cover the costs of cleaning the premises to prevent or stop the spread of disease, as reported by CFO.com.
If an owner experiences a forced shutdown from a catastrophe that creates an environment enabling the disease to fester, a claim may reimburse the expenses of a cleanup or equipment repair, such as an affected HVAC system.
Under certain conditions, insurance companies may attempt to deny a business interruption claim. The language contained in a policy, however, may allow reimbursement. When a carrier fails to carry out its promises, a business owner may take legal action.