The Clock Is Running Out to Commence a Lawsuit on Some COVID-19 Business Interruption ClaimsMarch 4, 2021
We are approaching the one-year anniversary of many of the COVID-19 governmental shutdown orders. For example, on March 15, 2020, Mayor de Blasio ordered entertainment venues in New York City to close and restaurants to only serve take-out and delivery effective March 17. A few days later, on March 20, 2020, Governor Cuomo issued a shutdown order for all non-essential businesses in New York State effective March 22. Some businesses had already begun to close even before those orders became effective due to the increasing presence of the virus at that time.
Commercial property and business interruption insurance policies typically contain a Suit Limitation provision, which requires that an insured’s lawsuit objecting to the insurer’s coverage denial must be filed within a certain period of time. That time period is often within two years from the date of the loss, but some policies require that the insured file a lawsuit within one year from the date of loss. These Suit Limitation provisions are the contractual equivalent of statutes of limitations and have generally been enforced by courts.
If a policy contains a one-year Suit Limitation provision, any lawsuit challenging an insurer’s denial of coverage for COVID-related business income loss must be filed immediately (unless the insurer agrees to extend that time period). Failure to comply with this contractual deadline for commencing litigation – which is much shorter than the statute of limitations for breach of contract claims – could result in insureds forfeiting their business interruption claims.
It is therefore critical for insureds to carefully review their policies to identify any suit limitation deadline, and if the policy contains a one-year deadline, consider seeking an extension from the insurer in the form of a tolling agreement or otherwise plan to file a lawsuit before the deadline expires in order to preserve the claim.
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