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Editor's Note: The following notice may be modified for use to inform an insured's property or business interruption (or business income) insurer of a loss claim from business closures or shutdowns resulting from stay-at-home orders and other governmental directives or worker shortages caused by the Covid-19 pandemic. This notice, if possible, should include detailed documentation supporting the claim.
NOTICE TO INSURER
[Insurer Name and Address]
Re: Policy [Number]
Ladies and Gentlemen:
We are hereby notifying you of a loss suffered as a result of interruption to our business operations [that was required to remediate possible novel coronavirus contamination] [which have been shut down since [Date] in compliance with [State/local government] closure directives].
Comments: Business interruption coverage and/or civil authority coverage are often included in property insurance policies. The terms of the insurance contract govern the scope of coverage and the insurer's liability. Typically, business interruption coverage provides for recovery of loss incurred while a business is unable to operate due to physical damage (fire, flooding, etc.) to its operations; civil authority coverage, on the other hand, provides for recovery of losses when a business is shut down or prevented from normal operations by government order.
Be prepared to provide detailed documentation of the relevant closure directives, the period during which they applied, the specific interruptions on your business, and (as further described below) the financial impacts, and all the underlying information that goes into your calculation. It is possible that your accountant or financial advisor may be able to further support your claim, and that the insurer will hire an independent accountant to verify your claims.
In some cases, business interruption policies may contain specific exclusions for pandemics, among other events. Whether coverage is available in connection with the Covid-19 pandemic is currently being debated as a public policy matter and litigated by private parties.
In addition, your insurance may be subject to a coverage or liability limit or cap on the amount reimbursed.
In accordance with Section [x.x] of the above policy, we are hereby notifying you of our claim for recovery of losses [in the amount of $x] due to the interruption of our business operations described above.
Comment: Insurance policies generally require insureds to submit claims promptly. The failure to comply with this requirement may be grounds for denying a claim. Early notification, even before a policy holder has made a final determination that it is entitled to coverage, is advisable. Business interruption policies are typically written to put the business in its status quo ante position, meaning that lost revenue, rent/lease payments, payroll costs during closure, taxes, loan payments, unexpected expenses, costs during a restoration period (if applicable) and claim preparation costs would be covered (less any savings due to the covered event). Expect to provide robust documentation of the losses, together with other financial records for past periods. In addition, there may be an indemnity period written into the policy that acts as a limitation on the period during which the loss may be claimed.
We will update you with further details, including amounts of losses being incurred, as such information becomes available. In the meantime, please contact [Name/Title] should you have any questions.