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Does Business Interruption Insurance Cover Payroll?

Many business owners add business interruption insurance to their business property policies to cover any loss of income or unexpected expenses during a time of extended closure or shutdown. However, if you are a business owner with a staff that relies on you for their income, it can be unclear if this insurance will cover them.

If you have any questions about your business interruption insurance and how it relates to your payroll, please contact Bentley & More, LLP today to discuss your situation. Our California business interruption insurance lawyers are dedicated to helping business owners seek financial relief during these especially difficult times.

What Qualifies for Business Interruption Insurance?

Generally, if your business is impacted in one or more of the following ways, you may be eligible to file a business interruption insurance claim:

  • Your business is shut down due to a covered event
  • Your business has reduced hours of operation
  • A state or government mandate has forced your business to close for an indefinite period of time
  • You are in danger of firing or reducing staff and personnel due to closure

The definition of a “covered event” may vary widely based on the provider, your policy, and your business. In many circumstances, this means a “direct physical loss,” such as physical damage to your property. However, in more unprecedented circumstances, such as the current novel Coronavirus outbreak, these covered events may be more up for interpretation or argument, with the help of an experienced business interruption insurance attorney.

Is Payroll Covered by Business Interruption Insurance?

Generally, payroll and employee wages are covered by most business interruption insurance policies. Business interruption insurance may cover the following during a closure or shutdown:

  • Any lost income your business may have recovered were they normally open
  • Any continuing expenses you have to pay even with the closure, e.g. utilities and rent
  • Any costs to repair or remodel your business if there is damage to it
  • Any expenses to move to a temporary location while the original location undergoes repairs
  • Any taxes or loan payments for the property

How Long Does Business Interruption Insurance Cover Payroll?

It is important to note that business interruption insurance only covers payroll for a period of time — usually determined when you first opt into the policy. The coverage period varies widely; some policies and providers only cover employee wages for three months, while others offer the option to cover payroll for up to three years.

Typically, the longer the duration of coverage, the more you have to pay into your business interruption policy.

Do I Need a Lawyer for Business Interruption Insurance Claims?

Because business interruption claims can be highly complicated and contentious, it is highly recommended to consult an attorney first before starting the filing process. The language that providers use in their business interruption policies can often be broad and ambiguous. This allows providers to interpret these policies in a way that might best benefit the company’s bottom line rather than your benefit. Additionally, circumstances that are fairly unprecedented are usually not pointed out in these policies — the COVID-19 outbreak, for example.

An experienced business interruption insurance claim attorney can help construct a case and argument that removes any doubt about the veracity of your business interruption claim. They can help you gather facts and evidence that prove how an interruption has impacted your business, while also negotiating with providers on your behalf to ensure you receive the compensation you need to continue operating your business.

Contact Our Business Interruption Lawyers Today

If you have any questions about business interruption insurance policies and how they may cover your payroll or other expenses, please contact us today. Our experienced insurance attorneys are committed to helping businesses through difficult times by securing financial relief from their insurance providers.