It is certainly no secret that the COVID-19 pandemic has taken a significant toll on business owners and employees across the country.
According to the United States Department of Labor, the nation currently has 10.1 million fewer jobs than it did before the pandemic accelerated in March. What’s more, the U.S. had 709,000 people seeking unemployment assistance on the week of November 7.
To be fair, the broader context suggests glimmers of optimism, as U.S. employers added 638,000 jobs in October and the unemployment rate fell to 6.9 percent, a full percentage point lower than September’s rate of 7.9 percent. Nonetheless, millions of business owners and employees are feeling severe economic strain, which is why it’s now more important than ever for individuals to know what financial resources are at their disposal.
“I think we’ll be seeing more federal support for laid-off workers in order to revive the economy,” says Michael Hamelburger, CEO of Cost Reduction Consultants. “This isn’t only going to be present during times such as the pandemic, but more of market correction measures as well.”
If you’re a struggling employer or a recently laid-off employee, here are some possible options for you to consider in the weeks and months ahead.
Business Owners Suffering From COVID Closures
Across all manner of industries almost all business owners have an insurance policy that provides some degree of financial protection against losses resulting from business interruption. However, it’s still fairly uncertain whether or not these policies will pay out under these unique circumstances, says Virginia Hamill, senior insurance analyst at Fit Small Business.
“For the most part, business insurance hasn’t done much to help small business owners recover their financial losses—at least, not those caused by lockdown orders,” says Hamill.
According to Hamill, the specific coverage that comes into play here is business interruption insurance (BII), also called business income insurance. Small business owners expect their BII to cover ongoing expenses and lost income if they can’t operate due to a covered property loss from a “direct physical loss.” The problem, says Hamill, is that when it comes to the current pandemic, there are a few notable catches.
According to Brian Evans, CEO of the New York-based Eastern Public Adjusters, it’s first important to recognize that not all business owners carry a business interruption insurance policy. According to the Insurance Information Institute, only about one-third of U.S. small businesses have this type of insurance. Furthermore, there is currently a lot of debate surrounding policy language requiring a “direct physical loss.”
“What’s most important for business owners to understand is that the law is not settled on what constitutes a ‘direct physical loss,’” says Evans. “Some cases throughout the country do hold that contamination and other incidents that render a property uninhabitable or unfit for its intended use are sufficient. Whether there is ‘physical loss’ must be determined on a case-by-case basis under the facts and specific policy language.”
According to Jim Pendergrast, senior vice president for altLINE Sobanoc, business interruption insurance isn’t really kicking in to help business owners right now. As a recourse, scores of business owners have filed lawsuits across the country demanding their insurance carriers pay BII claims, but most rulings thus far have been in favor of the insurance companies.
“Given the length of the pandemic and its almost universal public awareness, there have been minimal cases where carriers have approved business interruption insurance due to COVID closures,” says Pendergrast. “Though coverage exceptions and details will be different depending on your exact policy.”
The other potential snag for business owners looking to file an insurance claim are so-called “virus exclusions.” According to Hamill, many insurers added language to specifically exclude communicable diseases after a previous SARS outbreak in 2003.
On the legislative front, Hamill points out that a number of states are considering bills that would force carriers to cover COVID-related BII losses.
“That could be great for small business owners, but only if their carriers can actually pay all of their policyholder’s claims,” says Hamill. “There’s a risk that paying these claims would be catastrophic for insurance carriers and could threaten their solvency. In either case, I think a business owner should expect insurers to tighten up the language in their BII coverage and potentially change their underwriting guidelines to minimize their own risk.”
If business interruption insurance isn’t on the table, business owners may have another option—policy language that extends coverage for losses arising from “civil or military authority” orders that impair or prohibit access to an insured property. Given that tens of thousands of U.S. business have been forced to close or severely curtail their normal operations because of social distancing orders, this could be a possible path toward financial reimbursement. However, the scope and limitations of a civil or military authority endorsement are going to vary wildly from policy to policy, says Ben Wolkov, a partner with the South Florida-based AXS Law Group.
“Some may still require proof of physical damage while others won’t,” says Wolkov. “And then we’re back to trying to determine what constitutes physical damage. It’s nuanced and complex.”
According to attorney Matthew McCarley, the bottom line is that there are more questions than answers at this point.
“There’s no way to overstate how much of an unprecedented situation we’re in,” says McCarley, who has experience representing business owners who have been denied insurance claims. “If I were a business owner right now, I would get a copy of my policy, have an attorney look it over, and see what your options are. Don’t make any assumptions about what may or may not be possible.”
Employees Laid Off From COVID Closures
On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (aka the CARES Act), a $2.2 trillion stimulus package designed to help both business owners and employees who were struggling due to the pandemic.
According to Pendergrast, CARES contained a $600 weekly stipend for qualifying unemployed individuals. However, that policy ended in July and it doesn’t seem to be resurfacing at the federal level anytime soon, as Congress is currently in a stalemate with President Donald Trump over the details of a new stimulus that has yet to find bi-partisan support.
“Your best bet is to focus your energy on state programs and qualifications,” says Pendergrast. “Specifically look to see if your state is currently one of the 35 offering ongoing lost wage assistance programs. These are state-approved extensions of unemployment that add an additional $300 per week to qualifying unemployed individuals, many of whom have only recently been let go or furloughed due to COVID.”
Pendergrast says laid-off or furloughed employees can also turn to COBRA for continued medical coverage.
“COBRA is designed to allow folks to extend their previous employer-sponsored coverage for a specific time period even after losing their job, in most cases up to 18 months,” says Pendergrast. “The flipside to COBRA, though, is since you’re no longer employed there, you’re now responsible for paying full monthly premium totals. When you’re out of work, that’s a huge price tag.”
Nick DiUlio is an analyst and reporter for https://www.insurancequotes.com/ — which publishes in-depth studies, data and analysis related to auto, home, health, life and business insurance—where he studies the insurance industry in order to direct and oversee the management of editorial content that provides trusted tips, advice and insights for consumers.