M&M: What to know about civic authority coverage

Civil Authority Coverage, Natural Disasters, and the Coronavirus

While most business owners are probably familiar with the more common types of insurance claims, they may be at a loss when it comes to seeking coverage for more rare types of damage. After a year like 2020, business owners are probably dealing with some pretty rare kinds of losses. 

Thankfully, those losses may be covered by a civil authority clause.

While a civil authority clause may offer coverage for losses caused by coronavirus restrictions, making a successful claim under this provision can be difficult, partially due to coronavirus claims being a new type of claim without clear precedents. Because of this, insurance companies may attempt to deny these claims using bad faith tactics

Today, your McAllen bad faith insurance lawyers at Millin & Millin will go in depth regarding what you should know about civil authority coverage. 

Understanding a Civil Authority Clause

A civil authority clause is a provision of some business interruption insurance policies meant to protect the policyholder from the financial damage caused by a closure that was a result of orders made by a government official or other civil authority. 

Essentially, if your business is closed after the government has prohibited access due to a natural disaster, you may be able to file an insurance claim under a civil authority clause.

It’s worth remembering that, under these forms of clauses, coverage is offered based on damage done to property other than the insured property itself. This means that if your store was damaged by a hurricane, you probably wouldn’t file a civil authority claim. However, if the hurricane caused damage to the road that once gave access to your business and authorities declared access to the affected area prohibited, then you may be able to make a civil authority claim.

Events That May Cause Civil Authority Closures

A local or state government or other civil authority may order evictions or prohibit access to regions for many different reasons. A civil authority clause may include these, as well as a few other types of damages:

  • Hurricanes
  • Wildfires
  • Terrorism
  • Rioting
  • Flooding
  • Damage caused by firefighters and police

Keep in mind that not every civil authority clause will cover all of these types of closures. Insurance companies will use the specific language in your policy in an effort to argue against your claim. 

If your civil authority closure business interruption claim has been denied, you may want to speak to a bad faith insurance attorney to determine whether or not your claim was wrongfully rejected.

Ways Insurers May Deny Coverage

Due to the relative unfamiliarity of coronavirus-related business interruption claims, certain insurers have used bad faith tactics to deny rightful coverage. Nevertheless, there are also ways that these claims can be denied that don’t necessarily constitute bad faith:

  • Access to the business wasn’t fully prohibited
  • The restriction of access was considered a recommendation, not an order
  • The policy specifically disallows virus or bacteria-related claims
  • The damage caused by the virus doesn’t constitute “physical damage”
  • The restriction order was given to prevent damage, rather than in response to damage already sustained

This list of possible denial justifications is non-exhaustive, and just because your insurer is using one of these arguments doesn’t mean that they are in the right to do so. If you have any reason to believe that your business interruption claim was wrongfully denied, reach out to the bad faith insurance attorneys of Millin & Millin for an argument that stands strong in your favor.

If you’ve had a business interruption insurance claim denied, contact the McAllen bad faith insurance lawyers of Millin & Millin, PLLC, to learn about your legal options.

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