Business interruption cases and the role financial experts can play

Filing a business interruption claim has become one of the go-to moves for businesses as they try to mitigate the impact of COVID-19. A discussion of two cases that were adjudicated just before the COVID-19 crisis came into relief explains the trajectory many claims, including claims arising out of the COVID-19 crisis, may take and points to opportunities for damages experts. As the discussion makes clear, prevailing on a business interruption case is not an easy task for the plaintiff. At the same time, these cases often make it necessary for plaintiffs wanting to prevail to retain the services of a qualified financial expert.

The first case, arising under New York law, involved a company that custom-made precast concrete products for the construction industry. A dispute between the company (the plaintiff) and the insurance company arose when the latter denied the business’s claim for profits lost during the time a critical piece of equipment was inoperative. After the plaintiff prevailed in trial court on summary judgment, the insurance company appealed the decision with the court's appellate division, arguing that the plaintiff failed to meet the requirements of the controlling insurance policy. The appellate court rejected the insurer's interpretation of what the plaintiff had to show in terms of losses pursuant to the policy.

A different case involved a fledgling Rhode Island business that suffered extensive property damage after two major storms hit the area about a month after the company had started operations. The insurance company denied the company's business interruption insurance. This case also went to appeal, after the trial court denied the insurer’s motion for summary judgment on the company's breach of contract claim. A key issue was whether a business that had hardly been operating before the storms could claim the insurer’s failure to pay promptly caused damages of over $4 million and ultimately resulted in the company’s insolvency. The plaintiff presented some financial evidence from a consulting expert. 

The appeals court affirmed the denial of summary judgement, finding there were genuine disputes of material facts making it necessary for the case to go to trial.  

For takeaways on both cases and a tip for financial experts, click here.