Small Business Insurance Law

Insurance policies are contracts.  

For the most part, what they cover depends on what they say.  This summary can help you navigate insurance issues.  It is not a substitute for legal advice from an insurance coverage attorney addressing your specific circumstances.  That is especially important because there will be many COVID-related insurance cases in state and federal courts.  The law about what provisions mean, and their relationship to public policy, may evolve.  For that reason, if you make an insurance claim and it is denied, please seek counsel from an insurance coverage attorney.

Small businesses face lost income due to COVID-driven closures and potential litigation from customers and others.  

Two different kinds of insurance policies might provide coverage: commercial property insurance and commercial general liability insurance.

Commercial Property Insurance in Colorado

This kind of insurance coverage specifies covered events, subject to exclusions, and in the instance of an event-caused loss, provides coverage for a business’s lost income during a period of restoration (typically 90 days).  An example would be a fire at a covered restaurant that knocks out refrigeration equipment, so that the restaurant can’t operate until the equipment is fixed.  That restaurant would submit a proof of claim depending on what its policy provides – some commercial property insurance policies speak of net income and others speak of profits.  Less typically:  perhaps a nearby property causes the local fire authorities to shut down all businesses in that block, including the restaurant.  Is there coverage?  Sometimes, yes.

What about COVID-driven business closures?  Courts will probably decide whether the presence of COVID in a building is “direct physical loss or damage” to that property.  Courts also likely will decide whether commercial property insurance policies cover government-ordered business closures.  Some commercial property insurance policies exclude viruses (dating back to the SARS outbreak in 2003).

What should small businesses do?

• Retain and review your policy.  Start with the Declarations Page.  Contact your insurance agent, broker, or insurance carrier for a copy of your policy if you don’t have it.

• You will not recover anything unless you make a claim.  Part of the process will be to submit proof of loss, which you will need to be able to prove.  

• If your claim is denied, consult with an insurance coverage attorney.

Comprehensive General Liability (CGL) Insurance in Colorado

CGL insurance provides coverage against a third-party claim for bodily damage (often specified to include sickness or disease sustained by a person) or property damage caused by an occurrence.    Occurrence is “an accident, including continuous or repeated exposure.”  A typical example would be a customer who walks into covered business and falls, claiming that the floor was slippery.  CGL policies include a duty to indemnify (paying a covered claim up to limits) and a broader duty to defend (generally, providing a defense attorney).  The defense duty is broader because it applies if the lawsuit alleges damages arising from covered occurrences, even if they are not later proved.  For example, suppose the floor wasn’t slippery.  The insurance company would still have a duty to defend the policyholder.

What about claims against businesses by customers who say they got COVID by being at the business?  Courts will decide whether being open during open during COVID foreseeably leads to a customer getting sick.  These common policy exclusions might also come into play, and likely will be decided in the courts:

• Some policies exclude communicable diseases, with wording that varies, but look for “endorsements” that add that coverage back.

• Some exclude pathogens as well as pollution and expected/intended damages.

What should small businesses do?  The same steps apply for CGL insurance claims:

• Retain and review your policy.  Start with the Declarations Page.  Contact your insurance agent, broker, or insurance carrier for a copy of your policy if you don’t have it.

• You will not recover anything unless you make a claim.  

• If your claim is denied, consult with an insurance coverage attorney.