Can I Still File a Business Interruption Lawsuit if I Took PPP Money?
Yes, you can file a business interruption (BI) lawsuit with your insurance company to seek coronavirus crisis relief—even if you submitted a loan application through the Paycheck Protection Program, received a PPP loan, or were granted PPP loan forgiveness.
Participation in the Small Business Association’s Paycheck Protection Program does not preclude a business from pursuing a claim for COVID-19 losses. There is no reason to automatically assume a forgivable PPP loan will reduce the amount you can obtain through a business loss insurance payout. At this point, there are more questions than answers, but a New York City business interruption insurance lawyer at Douglas and London is ready to advocate for you.
The collateral source rule applies to business interruption cases.
The collateral source rule is a longstanding legal principle that states a person’s damages cannot be reduced by payments from other sources, such as medical insurance, workers’ compensation, or other third-party sources. For instance, a person in a car accident would likely be covered by their medical insurance– should a personal injury lawsuit be filed. That individual could also receive money from the defendant– not as a “supplement,” but as a consideration in its own right.
The result could be a “double recovery,” but the law reinforces the standard of care that all members of society should adhere to, with full punishment imposed on the at-fault parties. Plaintiffs should not be punished for prudently purchasing insurance to cover all bases.
Can a business seek business interruption insurance for coronavirus losses?
Paycheck Protection Program money has run out for most businesses fortunate enough to receive the loan, which has led many to pursue additional funds through their insurers. Predictably, insurance companies have made denial a standard practice, hoping to dodge paying a flood of claims from struggling businesses. The American Property Casualty Association estimates some 30 million U.S. businesses could submit virus-related claims totaling billions of dollars if insurers are compelled to honor the agreements.
Legislation to force insurance payouts is currently pending in California, Louisiana, Michigan, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and South Carolina.
Does BI insurance apply to coronavirus closures and sanitization?
The looming question remains to be answered– can a business recover money from insurance providers to cover pandemic-related losses, and can the business litigate when the insurer denies the claim? Business interruption is a first-party property insurance policy. It is designed to protect a business in the event of direct physical damage to the property resulting in loss or business inaccessibility due to a government’s order of civil authority.
Most commonly, business interruption is sought following a natural disaster. Some policies contain exclusions for losses resulting from a virus or bacteria, but others are worded in vague language that does not expressly prohibit such claims. So far, there have not been enough cases through the courts to indicate whether businesses or insurers will prevail in this unprecedented argument. For now, there is no harm in filing your claim.
What you can do now
- Keep accurate business records— when you were forced to shutter your business by local, state, or federal orders– like mandatory closures and social distancing requirements. Calculate how much was paid for sanitizing supplies, PPE, and remote work technology. Prepare balance sheets, income statements, and monthly cash flow statements. Preserve internal reports regarding payroll hours, family leave, furloughs, and sick leave. Collect similar records from this time last year to demonstrate your losses.
- Keep accurate Paycheck Protection Program records, just in case – documenting how much was received, when it was received, when the funds were paid, what they were used for, and when the SBA granted forgiveness for the loan, if applicable. It’s unlikely that receipt of a PPP loan will reduce the amount you can pursue, but it’s best to have all your ducks in a row regardless.
Contact us at Douglas and London for a free consultation
We are actively reviewing and preparing several business interruption lawsuits for businesses big and small. We will comb through your insurance agreement to see where ambiguous language or discrepancies exist to build a strong case for compensation. It costs nothing to call for a free consultation and get started on a claim.