The spread of COVID-19 and the efforts to minimize those impacts have unleashed an economic wrecking ball into many Hawaii businesses. Once a company starts looking for a way to avoid the financial blow, businesses should consider reviewing their insurance policies to see if they have coverage for the losses they have incurred. While the answers to these questions depend on the language of each insurance policy, Hawaii Public Adjusters has developed this general guide in hopes that it will shed some light on what we hope will be your path towards a successful recovery.

Do I Have Coverage for My Losses From COVID-19?

The answer will depend on the language contained in your insurance policies. There is no uniform rule for which type of policy will cover these types of losses. Some policies contain Business Interruption coverage and/or Civil Authority coverage. The latter applies to losses sustained as a result of closure orders issued by the federal, state, and local governments. A clear example would be the edicts coming down from Governor Ige and the various Hawaii county mayors that have ordered the restrictive access to restaurants, bars, and other public enterprises. Public Adjusters and Plaintiffs’ Attorneys with experience in insurance coverage may be able to help you with these types of restrictive decrees and how they may impact your coverages.

What Is Business Interruption Coverage, and Do I Have It?

Business Interruption Coverage is expected to cover losses from interruptions to a company’s operations, including lost revenues and other expenses such as payroll. Business Interruption Coverage is sometimes provided under a separate endorsement form and typically has its own policy limit and deductible. A review of your policy will help determine whether you have it. At Hawaii Public Adjusters, we always request a “certified” policy in its entirety.

I Have Business Interruption and/or Civil Authority Coverage. Am I Protected?

Business Interruption (known as “BI”) and Civil Authority coverages almost always require the loss be caused by …“direct physical loss of or damage to”… the business premises. Insurance companies that attempt to deny coverage based on the argument that COVID-19 has not caused “physical damages” are likely to be found to be incorrect. This because Hawaii law tends to interpret coverage provisions broadly, which, in turn, favors the insured. An order requiring you to close your business to the public may constitute a “direct physical loss of” the property. Additionally, in other mainland state cases, courts have found that property can sustain physical damage “without experiencing structural alteration.”

Is BI Coverage the Only Way to Recover Losses From COVID-19?

Not always. Other types of insurance coverage might exist that could extend to COVID-19 losses, including the Civil Authority (“CA”) Coverage. “CA” coverage applies in situations where access to an insured’s property is prevented or prohibited by a government order. An order that results in the “direct physical loss of” the property. Some policies may have other applicable coverage forms such as Extra Expense and Dependent Property. Some policies may even have Virus or Pandemic Coverage.

What If My Policy Has A “Virus Exclusion”?

Some policies contain an exclusion for losses “caused by” a virus. These exclusions are not so cut and dry, however. In Hawaii, the insurer has the responsibility in establishing that an exclusion fully applies. Exclusions, as part of a Contract of Adhesion (like your insurance policy), must be conspicuous, plain, and clear. Such language is interpreted narrowly and against the insurance company if there is any ambiguity within the policy’s language. Unless your property was closed due to contamination, there would be a strong line of reasoning that your losses were not “caused by” the virus, but rather, caused by the acts of those leaders invoking their civil authorities to order a business to close. “Social distancing” is NOT a virus. “Social distancing” is NOT a bacteria, nor is it any type of pandemic. I have never seen a single policy where “social distancing” has been described in an exclusionary format nor applied against any BI or CA claim.

Should I Contact My Insurance Company to Make A Claim?

If you are a layperson with more questions than answers, I would speak with a Public Adjuster or a Plaintiffs’ Attorney before contacting your insurance company about a possible COVID-19 loss. You will need to be prepared for how to report your claim. When you report a claim, some claims department personnel on the other end of the phone may be utilizing carefully designed scripts to question you. These questions lead you to answers which could lead the insurance company denying your claim. Recall the conversation differently later? Rest assured, you were recorded on that call. The coverage needed in this situation may be far too complicated to navigate on your own without first being informed.

What Should I Do Next?

If your business has suffered losses or continues to incur expenses due to the COVID-19 pandemic, you should speak with a Public Adjuster and/or a Plaintiff Attorney who has significant experience dealing with property insurance coverage issues.

Here Are Some Final Items to Remember:

You love your producer-agent, however...

Insurance agents often incorrectly tell their policyholders that their losses are not covered. They are the insurance company’s “first line of defense” against claims. Do not rely on what they tell you. I have many agents that are my friends and acquaintances, but you need to understand this; they “produced” the policy that you now have. I believe in my heart that they look for the best policy to fit your needs that you are willing and able to afford. That seller-buyer relationship, however, has nothing to do with representing your financial interest in an insurance claim. Think about this; insurance companies have many adjusters, claim staffers, claim managers, and defense attorneys. Who do you have?

Maintain records of your losses and expenses.

Make sure you preserve precise records of all your damages. You will need to show your overall operations, schedules, payrolls, and expenses you have incurred before, during, and after this time of difficulties. You will need to prove your damages. You will need to prove your claim. That is why it’s called a “claim.” You are making your “claim” to the insurer that has, within reason, promised to make you whole again.

Document your communications with the insurance company.

Insurance adjusters might say something favorable over the phone but fail to follow through. If you have already been in touch with your insurance company, keep a log of your communications. At Hawaii Public Adjusters, every communication is fully documented. We suggest you do the same.

Focus on your operation.

Do whatever you can to ensure the continued operation of your business and the health and well- being of your employees. Like an excellent Chef-Restaurateur friend of mine has a saying that I strive to follow … “Practice Aloha.”

Robert Hugh Joslin - CPPA
437 Liholiho Street
Wailuku, Maui, Hawaii 96793
Phone: (808)856-3041
Facebook: Hawaii Public Adjusters

About the Author:

Robert Hugh Joslin is Hawaii’s only Certified Professional Public Adjuster (CPPA), as designated by the Insurance Institute of America (IIA). He is the principal Public Adjuster at Hawaii Public Adjusters, where he also serves as its president. He is an active member of the National Association of Public Adjuster (NAPIA), serving several terms as one (1) of the twelve (12) nationally elected board members for the organization (2012-2015 & 2016-2019) and is currently the National Officer/Secretary at NAPIA for the 2019/2020 term. He currently serves as NAPIA’s Officer-in-Charge for the National Constitution and Bylaws, Professional Education, and Professional Certification Committees. He has been guest speaker at several national symposiums covering topics such as Adjuster Ethics, Hawaii Property Claim Practices, and Hawaii Property Policy Coverages. He has resided in Wailuku, Maui, Hawaii for 36 years with his lovely wife, Lisa.