What Retail Store Owners Need to Know About Business Interruption Insurance

As popular as online shopping has become, brick-and-mortar retail establishments still play an important role in the economy. According to the National Reserve Bank of St. Louis, 88.6% of all retail sales in the last quarter of 2019 were in brick-and-mortar stores. 

When California’s shelter-in-place order went into effect in March 2020 to help prevent the spread of COVID-19, retailers throughout the state that didn’t sell items deemed essential were forced to either adapt to the restrictions or temporarily close their doors. While some establishments were able to allow online orders or curbside pickup of purchases, those types of solutions simply weren’t practical for many others. 

In a state like California, where several cities are very popular tourist destinations, retailers in those areas very commonly rely on foot traffic from tourists for a significant part of their revenue. For example, Hollywood typically attracts about 8 million tourists annually and a significant amount of those visitors likely spend time in the Hollywood Highland Center and at other businesses neighboring the TCL Chinese Theater. The loss of tourism caused by the coronavirus pandemic means independent business owners and established retail chains alike lost a large part of their customer base in the area.

Retail Business Losses & COVID-19

When retail establishments have no other choice but to temporarily close, their losses often go beyond the merchandise they were unable to sell during that time. Business owners typically need to make rent and mortgage payments whether their store is open or not. Payroll still needs to be met. If a business needs to relocate to a temporary location to keep operating, that can be expensive.

In a situation like the coronavirus pandemic, losses might not necessarily end once a store is able to reopen again. With the major impact the outbreak has had throughout the world, it’s very likely many retail businesses could experience supply chain disruptions that make it difficult for them to obtain the merchandise they would typically sell. Even if a retail establishment is able to remain open during the lockdown, a supply chain disruption could still cause a business loss.

Business Interruption Insurance Claims for Retailers

Since stores can be forced to temporarily close their doors for a multitude of reasons, retailers often buy insurance policies that include business interruption coverage. Business interruption insurance coverage typically covers many types of monetary losses a business might encounter if they are forced to temporarily close, most typically due to reasons like fires, storms, or wildfires. They may also have contingent business interruption insurance that provides coverage for disruptions in the supply chain. 

Unfortunately, just when retailers need these types of insurance benefits the most, insurance carriers are very broadly denying their claims. Very often, they’re trying to say that a business wasn’t physically affected by COVID-19 or that COVID-19 does not qualify as a type of physical damage to their property. For those with civil authority coverage in their insurance plans or contingent business interruption insurance, insurers are commonly denying those claims by saying they also require a type of physical damage. 

If you’ve made a claim and have been denied or are getting ready to make an insurance claim, one of the best things you can do is get the help of a lawyer. Dealing with insurance companies can feel very intimidating, but lawyers deal with insurance companies all the time and they’re familiar with all the tactics they’ll use to wrongfully deny claims. The Wallace Firm is now assisting California retail business owners with their business interruption insurance claims. We work on a contingency basis, so there’s no fee unless you win. Contact us today for a free case evaluation.