What Does Business Interruption Insurance Cover?

a closed sign on a business

During this time of economic hardship in Michigan and throughout the United States due to the coronavirus pandemic, the Midland County dam failures, and more, many small business owners have turned to their business interruption insurance policies to compensate them for business losses they have suffered.

While some business owners have gotten their claims approved without much issue, others have run into significant amounts of red tape.

Below, we discuss what exactly business interruption insurance covers and what you can do if your claim has been denied.

What is Business Interruption Insurance?

Business interruption insurance is meant to compensate business owners for losses suffered due to factors outside of their control, such as natural disasters, property damage, government-ordered shutdowns, and more. Depending on your policy, you may receive compensation for the following business losses:

  • Lost revenue

  • Property loss and destruction

  • Cost to clean and sanitize

  • Cost of property repairs

  • Travel expenses

Recent statewide and nationwide disturbances and disasters have caused many business owners to file claims with their insurance companies to recover losses. Many business owners, however, have been getting their claims denied—at times, unjustly.

Coronavirus Pandemic

Many may assume that a pandemic would be reason enough for insurance companies to approve a business interruption insurance claim. However, claims related to losses caused by COVID-19 are the ones most frequently getting denied.

This is because, after the SARS outbreak in 2003, many insurance companies specifically excluded damages caused by microorganisms from their policies.

It’s important to keep in mind, however, that the language with which insurance policies are worded is very nuanced, and requires the expertise of a seasoned legal professional in order to determine whether a claim is valid.

Another element related to the coronavirus pandemic that has cost business owners significant losses are government-ordered shutdowns.

Luckily, there is a clause in some business interruption insurance policies called the “Civil Authority Clause.” This clause compensates business owners for losses incurred due to government-ordered shutdowns. This applies to the coronavirus pandemic since most businesses deemed non-essential were ordered to shut their doors in an effort to slow the spread of the virus. So, if your business was located in an area subject to “shelter in place” or “stay at home” orders, you may be eligible for compensation under this clause.

Midland County Dam Failures

In late May 2020, two catastrophic dam failures in Midland County forced thousands to evacuate their homes and businesses. The two dams affected were the Edenville Dam and the Sanford Dam.

The two dam failures displaced 10,000 residents. In the aftermath of the dam failure, Midland County residents were faced with catastrophic damage to their homes and businesses.

While some business owners may choose to pursue legal action and recover compensation through property damage and personal injury claims, others may find it easier to go through their insurance company rather than file a lawsuit.

Most business owners should not have difficulty in recovering compensation for property damage caused to their businesses by the dam failures since many business interruption insurance policies include coverages for natural disasters and other factors outside of business owners’ control.


Vandalism is something that most business owners experience at one point or another. Vandalism can cause significant losses due to property damage, missing inventory, and more.

It may be possible to recover compensation for these losses through your business interruption insurance policy, since many policies include coverage for damage to the physical part of a business and its contents caused by civil commotion or vandalism.

Do You Need Business Interruption Insurance?

It’s smart for every business owner to carry business interruption insurance because it’s impossible to know what danger or unforeseen event lies around the corner. The Midland County dam failures are perfect examples of this. Business owners who did not carry business interruption insurance coverage will have more difficulty recovering from their losses.

When purchasing a business interruption insurance policy, it’s also important to select a policy that will provide enough coverage for more than a few days. As we have seen from the coronavirus pandemic, many business owners have incurred losses for weeks to months.

This is also known as the policy’s "restoration period,” which is the length of time it will pay for lost income while the business is being restored or reopens. The standard policy limits the business income restoration period to 30 days, but this period can be extended to 360 days by endorsement.

Why Are Business Interruption Insurance Claims Getting Denied?

Unfortunately, many business owners have run into problems when trying to get their business interruption claims approved. While the coronavirus pandemic has, without a doubt, interrupted claimants’ businesses, many insurance companies have largely refused to pay claims under this coverage, citing a requirement for physical damage to the business.

As such, business owners across the country have taken insurance companies to court. Arguments for coverage include that the coronavirus sticks to physical surfaces and renders workplaces unsafe, and also that the pandemic has made businesses unusable—which may be considered property damage.

Still, these legal battles take time, and business owners who rely on their businesses for their livelihoods do not have time to wait.

What to Do if Your Business Interruption Insurance Claim Got Denied

If your business interruption insurance claim has been denied, we know how difficult this time may be for you. You rely on your business remaining open in order to compensate your staff, pay your business expenses, and support yourself.

It’s important to remember that insurance companies’ main objective is to protect their bottom line. As such, they will use any trick in the book to deny a legitimate claim, including business interruption insurance claims.

Therefore, it’s in your best interest to consult with an experienced attorney who knows how to decipher insurance policies’ language and negotiate with insurers. For instance, policies that exclude microorganisms may contain language that bans coverage for viruses or bacteria—not both. This is just one example of how an attorney’s expertise can help you find loopholes and opportunities for coverage that you would not be able to find on your own.

Have You Suffered Business Losses Due to Something Outside of Your Control? Contact Us Today

If you have incurred significant business losses due to the coronavirus pandemic, the Midland County dam failures, or something else outside of your control, our Michigan attorneys at Grewal Law PLLC are here to help. We can provide an in-depth reading of your policy, and apply over 100 years of combined legal experience to help you file a claim.

Contact Grewal Law PLLC today at (888) 211-5798 to schedule a free policy review with our team.