Many companies will be taking a harder look at their business interruption and disaster recovery insurance coverage in the wake of COVID-19, says Dan Cotter, an attorney with Howard & Howard.
“I think people are taking a harder look at all of their contracts and their insurance and how they go about their business to see if there are things they can change,” Cotter says.
Cotter spoke with the Smart Business Dealmakers Podcast about what to consider if you’re looking to make a business interruption claim and strategic priorities as you assess your company’s future. Here are excerpts from that conversation.
Listen to the entire interview
What is your message to clients who are exploring a business interruption insurance claim?
I’m having them look at their insurance policies to see if there are any specific exclusions or potential coverages. And then I advise them that if they have interruption, which almost everybody does in the United States with these shelter-in-place orders, they should consider giving notice to their insurance companies and expect that they will be denied. Then they’ll have to address whether they pursue litigation, as dozens of plaintiffs have already done, or if they just wait on it.
The reality is that all policies of any kind for business or personal have notice provisions that say if you don’t give timely notice of a potential claim or a claim, you may have waived your rights to recover. So from an insured’s perspective, it’s really crucial that if you do, in fact, have business interruption and an impact to your businesses, that you consider giving notice timely so that it is not an area where the insurance companies can deny coverage.
What are some strategic priorities for companies as they assess their future?
I think the two priorities should be revisiting the strategic plan and the thoughtfulness of where the business was headed and think about what this looks like. I just saw something that said again we’re going to see breakouts of the virus for perhaps the next 18 to 24 months.
People need to be looking at their contracts and at their footprint and at their backup plans of how they will deal with this if it continues. A lot of it depends on the industry. If you’re in the fitness and gym industry, you need to be thinking about what this looks like if there are closures or suspensions of your business or some of your franchisees.
If you’re a restaurant, you need to think about what it looks like to have 25 percent capacity. And again, I think they need to have good conversations with their insurance brokers, but also with their commercial lease brokers and everybody that has a major service that’s being provided that might be impacted going forward. Have some kind of framework in mind to be able to address this more nimbly in the future.