Business insurance, also known as commercial insurance, provides protection from risk and liability for a wide variety of different aspects of a business. For example, a business can purchase insurance that covers financial loss resulting from defective products. Alternatively, a business can also buy an insurance policy that protects against property damage on its premises.

However, it is not always feasible for a business to purchase insurance for every single type of financial or economic loss. This is especially true when it comes to owners who operate small businesses. For instance, most small businesses are not equipped to pay for the full amount of losses associated with the type of property damage caused by a natural disaster or another unforeseeable, large-scale event.

Instead, small businesses tend to purchase business insurance coverage for specific situations that frequently occur or are easy to predict and would lead to a definite loss for the small business if the situation were to occur. 

In order to remain protected by business insurance, companies will typically need to pay some amount of monthly premiums to their insurance providers. An insurance provider will then agree to reimburse a company for up to a certain amount of damages. The amount that an insurance provider agrees to pay can be found in a company’s insurance policy or contract, and will usually vary based on the terms of each contract.

Recently, there has been much litigation over the issue of whether an insurance provider should have to pay for the losses suffered by a business due to the pandemic. While there is no clear solution to this problem as of yet, state legislatures have started to discuss enacting laws that would require insurance companies to reimburse in-state businesses for losses caused by the pandemic and government shut-down orders.

Insurance providers are also looking into the issue despite disagreeing with businesses and arguing that they should not have to pay. Some insurance providers, however, have started considering creating insurance plans that would explicitly cover pandemic incidents in the future. Businesses would then need to purchase this specific kind of coverage if they wanted to be protected in the event of another global pandemic. 

To learn more about business insurance and which type of coverage may be best suited for your particular business, you should speak to a local business lawyer for further advice on the matter.

Are There Different Types of Business Insurance?

When it comes to purchasing business insurance, a company should have no trouble finding the right type of coverage since there are plenty of options to choose from. However, many small businesses tend to purchase a type of insurance known as a “business owner’s policy.” 

A business owner’s policy not only provides protection against the biggest types of liabilities for businesses (e.g., general liability, commercial property, and business income), but also does it in a way that permits a business to customize their plan. 

Some examples of different types of business or commercial insurance include the following:

  • General liability insurance;
  • Business income insurance;
  • Commercial property insurance;
  • Professional liability insurance;
  • Workers’ compensation insurance;
  • Commercial auto insurance; and
  • Business insurance policies that affect a specific industry (e.g., malpractice insurance for attorneys, accountants, or doctors).

For businesses that would prefer complete coverage, they may opt to purchase a plan that is similar to a business owner’s policy. On the other hand, if a business does not want to spend too much money on insurance or only wishes to purchase certain types of coverage, then they can buy separate business insurance policies that focus on a particular aspect of a business.

Businesses must also take into account their location and the laws of their jurisdiction. For instance, some businesses are required to obtain insurance coverage under state law if the business is considered to be part of a particular industry. Businesses located in areas that are susceptible to volcanic eruptions or earthquakes, may also be required to buy specific coverage for property damage in certain states.

Finally, as mentioned in the above section, insurance providers are also considering creating plans that explicitly cover pandemics. However, businesses do not have to wait until such policies are created. All they need is a lawyer to draft a new insurance contract that contains a provision regarding coverage for losses related to pandemic events. Of course, the insurance provider would also have to agree to such changes as well.

What Happens in the Event of a Business Insurance Dispute?

In the event that there is a dispute over business insurance coverage, the business should review the terms of their insurance policy or contract. In most cases, the solution to the dispute can be found in these documents. A business insurance policy or contract is also the document that a court will examine first. This can help the judge to determine the rights of each party to the contract as well as the extent of the coverage purchased.

In some cases, however, the language of a contract may not be clear or may contain vaguely defined terms. In rare instances, a dispute may even arise over an oral contract. In which case, a court may have to intervene to recommend the best course of action for the parties. For instance, the court may order the parties to redraft or amend a portion of the insurance contract, or it can issue a monetary damages award if one of the parties is in breach of its terms.

Similar to most types of contract disputes, the outcome will primarily depend on the terms and conditions of the parties’ agreement, as well as on the state and local laws that pertain to the contract issue in question. 

Are There any Legal Remedies for Business Insurance Disputes? 

Since business insurance disputes are mostly based on contract law, many of the same legal remedies will be issued to the prevailing parties in a lawsuit. Thus, some examples of legal remedies that a business may be able to recover in an insurance dispute include:

  • Monetary damages; 
  • Punitive damages;
  • Statutory damages;
  • Partial or full reimbursement for losses; and
  • In some instances, criminal penalties.

What are Some Common Business Disputes Involving COVID-19 Issues? 

As discussed above in the very first section, business disputes over insurance coverage involving COVID-19 issues have recently become a hot topic for discussion. The main argument that state legislatures and insurance providers are focusing on are whether an insurance company has to reimburse a business due to the interruption of business operations caused by the pandemic.

There is no clear answer to this question as of yet, and many businesses will need to rely on the terms of their specific insurance policy or contract to resolve this issue.

Some other recurring business disputes involving COVID-19 issues and insurance providers include:

  • Whether an insurance company needs to pay for the physical loss or property damage to a business that is caused by a government-issued shut-down order;
  • Whether an insurance company needs to pay for financial losses caused by data breaches and cybersecurity incidents as a result of employees working from home because of COVID-19;
  • Whether an insurance company needs to reimburse a business for premises liability coverage or economic damages (e.g., due to COVID-19 exposure at a business);
  • Whether an insurance company will need to pay a business for financial losses resulting from delayed shipments or damaged goods because of COVID-19; and
  • Whether an insurance company will need to cover losses associated with the shutdown of third-party businesses that the insurance holder business relies on.

What if I Have a COVID-19-Related Business Dispute?

There are several options that a business can pursue to attempt to resolve a COVID-19-related business dispute with their insurance company. First and foremost, a business should review the terms of their insurance policy and/or contract to determine whether there is already a forum provided for legal disputes. In most cases, the parties to a commercial contract will be required to undergo arbitration to solve a legal dispute.

If an insurance contract or policy does not specify a venue, then the next option is for the business to communicate with their insurance company to see which portions of an insurance policy they can negotiate without having to hire any outside parties like a lawyer.

If a business is unable to persuade their insurance provider to cover certain losses, then they should ask their provider to resolve the issue through an alternative method of dispute resolution, such as arbitration or mediation.  

As a last resort, a business can file a lawsuit against their insurance provider. This can include filing an individual private lawsuit, a class action lawsuit, or joining a matter in multidistrict litigation.

Do I Need a Lawyer for Help with a Business Insurance Dispute?

Business insurance disputes can be fairly complex due to the fact that each dispute must be decided in a manner that comports with both the contract and insurance laws of a particular state. Thus, the outcome to these disputes can vary by location. To make matters even more complicated, business insurance disputes often involve multiple legal issues. 

Therefore, if you are involved in a dispute over business insurance coverage, then it may be in your best interest to hire a local business lawyer immediately for further assistance. An experienced business lawyer who practices in your area can offer advice on how you should proceed with your claim and can help you file a lawsuit against an insurance provider if need be.

Your lawyer can also explain how the terms of your insurance contract and the laws in your jurisdiction may affect the outcome of your case. In addition, your lawyer can assist with amending an existing insurance contract or creating a new one if necessary. Lastly, if you need legal representation in court, your lawyer will be able to provide this as well.