• May 17, 2025
• By Brian

Business Interruption Insurance: COVID-19 Claim Success Rate

Introduction

The COVID-19 pandemic caused unprecedented disruptions to businesses worldwide, leading many to file claims under their business interruption (BI) insurance policies. However, the success rate of these claims has varied significantly due to legal interpretations, policy wording, and jurisdictional differences. This article examines the factors influencing COVID-19-related BI claim approvals and the overall success rate for businesses seeking compensation.

Understanding Business Interruption Insurance

Business interruption insurance is designed to cover lost income when a company cannot operate due to a covered peril, such as property damage. However, most traditional BI policies do not explicitly include pandemics or viruses unless specifically endorsed.

When COVID-19 forced shutdowns, many businesses assumed their BI policies would cover losses. Insurers, however, often denied claims, arguing that:

(a common requirement in BI policies).

(many policies had clauses excluding losses from infectious diseases).

COVID-19 BI Claim Success Rate

The success rate of COVID-19 BI claims has been mixed:

1. Early Denials and Legal Challenges

Initially, insurers denied most claims, leading to widespread litigation. Courts in different jurisdictions ruled inconsistently:

Many claims were rejected unless policies had no virus exclusions. Some state courts (e.g., California, Pennsylvania) ruled in favor of policyholders, while others sided with insurers.

The Financial Conduct Authority (FCA) brought a test case in 2020, resulting in a Supreme Court ruling that certain BI policies should cover pandemic-related losses if the wording was ambiguous. This increased claim approvals for some businesses.

2. Success Rate Estimates

Less than 40% of claims were initially successful, though settlements increased after legal pressure.

Following the FCA test case, around 60-70% of eligible claims were paid out.

Success rates varied, with some courts enforcing coverage where policy language supported it.

Key Factors Influencing Claim Success

Policies without virus exclusions or with broad “prevention of access” clauses had higher success rates.

Courts in some regions (e.g., U.K.) were more favorable to policyholders than others (e.g., certain U.S. states).

Businesses that pursued litigation or joined class actions had better outcomes.

In some cases, regulators pressured insurers to honor claims.

Conclusion

While many COVID-19 BI claims were initially denied, legal rulings and policy interpretations led to varying success rates globally. Businesses with clear policy language and strong legal arguments had better chances of compensation. Moving forward, insurers and policymakers may refine BI coverage to address future pandemics more transparently.

For businesses considering BI claims, consulting legal and insurance experts remains critical to navigating complex policy terms and maximizing recovery chances.

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