Many policyholders with COVID-19 business-interruption losses should take care to act now to preserve their claims.
As the one-year anniversary for the COVID-19 pandemic and related government shutdown orders approaches, it is important for policyholders with business interruption or other losses to review their policies for any potential issues regarding the timing to bring suit. Many insurance policies contain suit limitation clauses (or other similar clauses) that limit the time for a policyholder to file a coverage suit. Some of these clauses provide for one year to bring suit. As is often the case, the law regarding how such limitation provisions are enforced varies depending on the jurisdiction. Further, the timing of when their applicability accrues or is calculated (e.g., from the date when a company denies coverages vs. the date of the purported loss) also vary depending upon the particular policy language. The issue is further complicated when, as for business interruption losses related to COVID-19, a policyholder’s losses were (or are still) ongoing, thus impacting how to assess any time-related provisions. However, many courts have held that such provisions act as contractual statutes of limitations, precluding suit if the policyholder sues after the specified period.
Often, a best practice is to reach out to the insurance companies to toll the period to bring suit. Whether or not insurance companies will agree to any such request, however, is unclear. Policyholders should therefore examine their policies for any suit limitation clauses to ensure that their rights are protected. If insurers refuse to such agreements, policyholders need to consider bringing suit in order to preserve their rights to coverage.