Insurance firms denying COVID-19 claims: lawyer
Many policies don’t cover interruptions in supply chain or business, official says
Dozens of B.C. businesses have had claims for losses caused by the COVID -19 pandemic turned down by their insurers despite their business interruption policies containing language that makes them candidates for approval, according to one prominent Vancouver lawyer.
David Klein, managing partner at Klein Lawyers, says more than 50 businesses had approached his firm as of Wednesday with complaints about how their insurance companies had rejected their claims.
The companies he has spoken with cover a wide range, including restaurants, shops, and sports and entertainment businesses. Not all have a case, but a great many do, he said.
“Is there business loss coverage that will cover this type of event? Not everyone purchases this kind of coverage. Most of them do, because it’s not very expensive,” he said. “The second thing we’re looking for is exclusions, like for a pandemic or a virus. When SARS hit (in 2003), a lot of insurance companies put it in. Many do have coverage for epidemics, for civil authority closure,” he said. And in his eyes, in the current circumstance, having coverage for one of those cases but not the other didn’t matter in the current circumstance.
“The civil authority order is because of the pandemic,” he said.
“Insurance contracts are not interpreted by splitting hairs. When in doubt, the benefit of the doubt is to the insured, not the insurer,” he added. “So many of the insurers are just issuing blanket denials.”
Another Vancouver lawyer, Daniel Shugarman from Whitelaw Twining, has worked on the defence side of insurance cases and has a different view of the situation. The vast majority of business interruption policies have a requirement that there be physical damage, he pointed out.
And in his view, these businesses haven’t suffered physical damage or had their physical building contaminated by the coronavirus.
“Ninety-nine per cent, if not all of the businesses closed not because of contamination but because of a government order,” he said. “And almost all the policies that I have reviewed do not have coverage that covers losses due to pandemic.”
In an email, Vanessa Barrasa, the Insurance Bureau of Canada’s manager of media relations, said that in general, “commercial insurance policies and traditional business interruption policies do not offer coverage for business interruption or supply chain disruption due to a pandemic such as COVID-19.”
She also pointed out that large events can purchase cancellation coverage — the Wimbledon tennis tournament did, for example, while the South by Southwest music and arts festival in Texas did not.
Klein said there is no question his firm will be filing several class-action lawsuits. A class action against insurers has already been filed by another firm in Saskatchewan along similar terms to the cases Klein Lawyers is looking at.
“We have to wait for people to contact us,” he said.
“We’re not going to be filing a class action against every policy. We’re currently identifying the insurers we’ll be looking at for class-action litigation.”