Business Interruption Insurance

Business interruption insurance, sometimes called business income coverage, pays a business for income it loses while it is shut down or limited because of a covered event. It can also cover continuing costs like payroll, rent, and loan payments during the restoration period. It is usually part of a commercial property policy rather than a stand-alone product.

Most policies only pay when the lost income results from "direct physical loss of or damage to" property, such as a fire, a burst pipe, or storm damage. That phrase became the center of one of the largest insurance fights in U.S. history after COVID-19 shutdowns in 2020, when thousands of restaurants, stores, and other businesses filed claims and then lawsuits after insurers denied them.

In August 2020, the Judicial Panel on Multidistrict Litigation refused to combine COVID-19 business interruption cases against many different insurers into a single nationwide proceeding. Courts then decided the cases policy by policy and state by state. The overwhelming majority of federal appeals courts and state supreme courts ruled for insurers, holding that closure orders and the presence of the virus did not cause physical loss or damage. A notable exception was the North Carolina Supreme Court, which ruled for restaurant owners in a 2024 case involving a policy without a virus exclusion.

The lesson for business owners is that the exact policy wording controls. If a claim is denied, get the denial letter in writing and a full copy of the policy, including exclusions and endorsements. Our guide on how to sue a company covers the basics of bringing a claim.