COVID-19 Enterprise Interruption Declare Timing Issues

By Mitch Rapp On Apr 27, 2021

You are a policyholder whose business has been decimated by COVID-19. You immediately make a business interruption loss claim under your policy to your insurer, and in response, your insurer refuses coverage a few months later. You have decided to wait to see how the courts ultimately decide on the various coverage issues that arise from these claims. The cases are still ongoing, however, and it has been a year since you first filed your claim. How long can you wait to sue?

The answer: it varies. How long you can wait depends on each policyholder’s specific insurance language and the law governing the insurance claim. Many policyholders are wrong to believe that the same filing deadlines generally apply to COVID-19 business interruption claims. Not in certain circumstances. For example, many commercial real estate policies that include business interruption coverage have covert contractual statute of limitations that require insured parties to bring action much earlier than would otherwise be required under applicable law.

For example, here are some examples of contractual restriction languages found in commercial real estate guidelines:

“No lawsuit, lawsuit, or claim recovery process will be maintained in a court or tribunal unless: … legal action is taken within two years of the damage occurring.”
“No action, suit, or process to recover any claim under this Policy will be sustained in any court or tribunal unless … the suit is commenced within twelve (12) months of the date on which the Company makes its final offer submitted settlement or denial of loss. “

Another complication of the analysis are various toll doctrines, which, with or without the consent of the insurer, can extend the deadline for filing a complaint regardless of the aforementioned contractual limitation periods. For example, according to the fair toll doctrine, the time between filing an insurance claim and the insurer’s refusal to provide coverage generally does not count towards the length of the contract to be sued.

In other words, if a policy has a contractual statute of limitations of one year and the insurer waits eight months after a claim has been filed for cover to be denied, the period of action does not expire during those eight months. Insurers sometimes agree in writing to extend a contractual deadline to sue for various reasons.

Policyholders faced with a decision to sue their insurers for COVID-19 business interruption losses should not assume they have the standard deadlines for the lawsuit but should review their specific policies with an insurance advisor to determine the deadline for filing the lawsuit to determine.