What is ‘Prohibition of Access’ in a Civil Authority Coverage Claim?

Civil authority provisions are standard in commercial insurance policies. If a government entity prohibits access to a business, the insurance should cover lost income. Now, companies affected by the pandemic are hoping that these provisions in their business interruption (BI) policies may come to their rescue– since insurers are denying these claims for other reasons.

Many business owners carrying BI insurance thought their policies would include pandemic-related losses. However, many insurance carriers denied the claim. They’ve even been told not to bother filing. If you have not filed a claim for BI insurance, do so immediately. You cannot pursue a lawsuit against the insurer or join a class-action lawsuit unless your claim is filed and denied.

If your business was adversely affected due to the pandemic and you carry this insurance, a New York City business interruption insurance lawyer at Douglas and London can help. We will carefully review your policy and examine whether prohibition of access may apply in your coverage.

Prohibition of Access

A civil authority may include a local, state, or federal government entity. The prohibition of access must prohibit access to the covered premises. In addition, the prohibition of access must be mandatory, not optional, for coverage consideration.

Civil Authority Provisions

The wording of the civil authority provision in an insurance policy is crucial. For example, standard language may state that the insurer will pay for the actual business income loss sustained, as well as extra expenses. This must result from civil authority actions prohibiting access and due to direct damage to property. Note that this language still refers to property damage. Just because a policy contains a civil authority provision does not mean your claim is covered.

A Copy of the Order

To fully understand the meaning of prohibition of access under these particular circumstances, it is necessary to obtain a copy of the order. Again, the language used is paramount. If the order refers to the regulation of access or impediment of it– that is not the same as true prohibition of access. Your lawyer can discuss your options if you are allowed to operate your business at a much-reduced scale due to a civil authority mandate.

Property Damage

Business interruption insurance generally only covers lost income due to property damage. Typically, this is due to fires, hurricanes, and other natural disasters. When it comes to COVID-19, there is no property damage per se.

Even if employees or other persons are diagnosed with the virus, that does not mean there is any damage to the property that cannot be mitigated with proper cleaning and sanitization. If your property damage involved mold or other toxins that required extensive removal and renovation, business interruption insurance should cover it. That is not the case with coronavirus.

An Evolving Scenario

The novel coronavirus and the resulting shutdowns are still an evolving scenario. Legislation has been introduced in New York and other states to require insurance companies to cover business interruption due to the pandemic. Unsurprisingly, insurance company lobbyists are fighting these proposed bills tooth and nail.

How these circumstances play out remains to be seen, but your attorney should keep you abreast of any legislative changes affecting your claim.

What We Can Do for You

If your commercial insurance policy includes a prohibition of access by a civil authority provision, we can review your policy to determine whether the language may apply to pandemic-related losses.  We will also discuss whether you may want to join a class-action lawsuit.

Contact Us at Douglas and London for a Free Consultation

Schedule a complimentary, confidential consultation by submitting our online form or calling or texting 24/7. Bring your policy to the meeting for review. If you do not have a complete copy of your policy, you can obtain one from your insurance company. Our dedicated attorneys work on a contingency basis, so there is no fee unless you receive compensation. Our lawyers have recovered more than $18 billion for clients in verdicts and settlements.