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Business Interruption Insurance for the Covid-19 Pandemic

Business Interruption Insurance for the Covid-19 Pandemic

May 14, 2020
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Like many businesses, dental practices have been hit hard by the COVID-19 Pandemic. While dental practices were not forced to close completely, most State Board of Dental Examiners have recommended that dentists treat only emergency cases during the current State of Emergency that remains in effect in many states. Moreover, The American Dental Association and the Centers for Disease Control and Prevention recommended that all non-emergency dental operations cease.

The resulting closure and/or significant roll back of services has potentially caused tremendous losses in the dental industry. One potential for relief is for businesses such as dental practices to seek coverage from their own insurance policies under their Business Interruption Clauses and Civil Authority Clauses. These insurance protections cover losses sustained from direct interruptions to a company’s operations. As with any insurance policy there are different exclusions and provisions that are specific to each individual dental practice.

While there are many different forms of business interruption or civil authority insurance policies, most only cover losses to business operations from fire, tornadoes, hurricanes and other natural disasters. Often business interruption insurance is tied to a direct physical loss, damage or destruction to the property. As such, each individual insurance policy must be reviewed to determine the potential for coverage.

In order to begin the process of determining whether a dental practice may qualify for Business Interruption insurance, each individual dental practice must:

  • Be insured
  • Have damages such as lost profits, that can be readily quantified by showing history of profitability prior to COVID-19
    • Documentation containing information outlining cancelled appointments as a result of COVID-19.
    • Collect past and present financial statements
    • Tax returns
    • P&L statements (monthly)
    • Budgets and projections
    • General accounting records
  • Make a claim quickly, you do not need to wait for your business to re-open to file your claim
  • Know that a denial of a claim is not the end of your possible recovery
  • Know that each policy is different thus requiring thorough individual examination
  • Know that most business interruption and civil authority provisions contain exclusions and limitations that may or may not affect your potential recovery
  • Know that a policy without a specific virus or pandemic exclusion leaves open the possibility to litigate the issue further
  • A policy that does not specifically contain a virus or pandemic exclusion should in theory strengthen a claimant’s position.
  • Businesses around the country have already brought lawsuits as a result of insurance companies denying coverage under business interruption clauses- including dental practices. See Sandy Point Dental PC v. The Cincinnati Insurance Company, et al., No. 1:20-cv-02160 (N.D. Ill. Apr. 6, 2020).

As always, we are here to help and make you discuss your options with your commercial insurance and legal teams. 

Stay Safe!

-Ryan & Brian

 

This is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions. (05/20)