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Gephardt: Businesses Suing To Make Sure Insurers Honor Interruption Policies During Pandemic

BLUFF, Utah – Many businesses pay for business interruption insurance that is supposed to kick in if they must close their doors. In this pandemic, many insurance companies have been refusing to pay claims from businesses that were forced to close.

Now, thousands of businesses are taking their insurance companies to court to make sure insurers honor their interruption policies.

Steven Simpson’s businesses in Bluff, Utah, – the Twin Rocks Trading Post and Twin Rocks Cafe – were hit hard by the coronavirus pandemic.

“We were closed for about two-and-a-half months, altogether,” Simpson told the KSL Investigators.

He filed a claim with his insurance and even though he has paid for coverage on business interruption for 30 years, Simpson said he was denied.

“In a word, devastating,” is how he described the consequences of that denial.

Simpson is now one of at least 263 lawsuits nationwide brought on by businesses suing their insurance companies for denying their business interruption claims.

The common reason for denial? Utah Insurance Commissioner Todd Kiser told KSL back in April that most policies do not cover outbreaks of illness.

“There has to be a triggering event,” he explained. “Something in time that happens, a moment (where) there is a direct, physical specific loss associated with the claim.”

We asked Kiser if that definition includes orders issued by the county declaring businesses may not be open.

“Nope,” he responded. “That’s not a direct physical loss.”

So far, most courts have agreed with that definition and have dismissed these types of cases.

One judge in Missouri allowed a lawsuit to proceed saying the virus is a “physical substance” and the shutdowns of business resulted in “direct physical loss on the premises and property.”

It is an argument Simpson is making in his lawsuit.

“There were also government closures or government orders that required us to close,” he said. For now, he is still waiting for his day in court.

“I’m sure the courts will determine who is doing their job correctly,” Simpson said.

According to the National Law Review, about a third of business interruption insurance cases have been filed by restaurants and bars — like Simpson’s.

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