Safety net meant to protect businesses and jobs could fail

MEMPHIS, Tenn. — The coronavirus pandemic and the lockdown really hit businesses hard. When customers stopped showing up, everyone’s bottom line was hurt. Small businesses were affected the most.

While many of those small and large businesses alike have business interruption insurance, those business owners are learning a very difficult lesson: their financial future is all in the fine print.

From restaurants to department stores to mom and pop shops, the Memphis business community was a ghost town for weeks. Employees were forced into unemployment lines while employers begged for a timeline from local officials so they could get back to business.

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"We saw 90% less of the patients that we see normally." Dr. Gary Mantell told FOX13.

Mantell has owned and operated his private practice in Memphis for 35 years.

"Obviously it goes without saying, but the revenues were similarly down. So, it was a crunch that I'm sure was felt by everyone else locally and throughout the country," he said.

Mantell was able to pay his employee with government assistance from the PPP program. But that didn’t make up for lost revenue.

So, he turned to the business interruption insurance policy he's paid premiums on for more than three decades.

“Of course I didn’t read a 60-page policy of fine print and sure enough, a virus is an exclusion,” said Mantell.

His policy, and most like it, doesn't cover virus outbreaks or pandemics.

"This is one of those times when you really need a lawyer to help you," said employment attorney Alan Crone.

Crone told FOX13 that as early as 2004, the insurance industry was advised that large scale virus outbreaks could become an issue. That was only months after the SARS outbreak which was much smaller in scale than the coronavirus pandemic.

So, insurance companies began writing virus-specific exclusions into policies. But even if a business owner’s policy has that type of exclusion, Crone said you should hire an attorney and file a claim anyway.

"You're going to have to file an initial claim and have it denied and then either appeal it if your policy has an appeals process or file a lawsuit and you'll have to wait," said Crone. "I think this is going to be one of those big litigation bubbles over the next year or two. Courts are going to have to decide a lot of issues, some of which I've just outlined to you. But you shouldn't just assume you don't have coverage."

According to insurance industry website, The Insurance Journal, small companies with 100 or fewer employees could see business continuity losses totaling $431 billion per month.

Hurricane Katrina, by comparison, only cost the business interruption insurance industry an estimated $9 billion total.

In the insurers’ defense, since virus exclusions became part of most policies, they’ve not collected premiums that would account for the claims that could come once lawsuits are filed.

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