Understanding Business Interruption Coverage and COVID-19

The widespread shutdown orders sparked by the COVID-19 pandemic have financially impacted dental practices across the country. While Paycheck Protection Program (PPP) loans and the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided some relief for practices, many dentists and their staff are still struggling with the ramifications of lost revenue. 

Dental practices, like other businesses, have insurance to cover unexpected situations that result in revenue loss, but many found that their business interruption coverage took exception to a global pandemic. So what does business interruption insurance actually cover? If business interruption insurance doesn’t cover pandemics, what else can dentists do to protect their practices in this kind of situation? Can anything to be done to change how the insurance industry approaches pandemics? 

Insurance in the Dental Industry 

Insurance is an expected cost of doing business. Dentists need to protect themselves with coverage for issues like malpractice and disability. Malpractice insurance provides coverage for professional liability, while disability insurance provides income protection in case a dentist is unable to work due to illness or injury. Life insurance is also a worthwhile investment, particularly if the dentist has a spouse and children. 

Dentists also need insurance coverage to protect their business. “If you are the owner of the practice, then, of course, you need a business owner’s policy (BOP),” said Richard Engar, DDS, FAGD, CEO of Professional Insurance Exchange Mutual Inc. A BOP typically includes coverage for property damage, liability protection for the business itself and business interruption, according to the Insurance Information Institute.¹ The amount of coverage offered by a BOP depends on your business’s needs and the premium you are willing to pay; the higher the premium, the more coverage for your business. 

Most dental practices will have some form of business interruption coverage bundled as a part of their overall BOP, but it can be easy to miss what exactly this type of coverage entails. 

• What it covers: Common scenarios business interruption insurance may cover include material damage to property that results in the closure of the practice, decontamination requirements following business closure (e.g., cleaning up water damage) and denial of access (e.g., construction in front of your practice prevents patients and staff from reaching the office), according to Engar. Issues like flood, fire and other natural disasters could be covered, depending on your policy and its exclusions. 
  
  In the case of a building fire, the owner of the building may be responsible for filing an insurance claim rather than the renting dental practice. “As far as wildfires, it may depend on the location, and the dentist should check with his or her BOP insurance carrier to ensure that proper coverage is in place,” said Engar. 
  
  You can file a claim to help cover the expenses that don’t stop just because your practice is closed. Business interruption coverage can help you pay your office’s rent or mortgage, your practice’s loans and payroll, as well as provide coverage for lost revenue.² 
  
  
• What it doesn’t cover: What isn’t covered is specific to the individual policy, but common exclusions include power outages, voluntary business closures and undocumented income.³ And, as highlighted by COVID-19, pandemics are largely considered exclusions. 
  
  
• Filing a claim: You need to file a claim with your insurance carrier in order to receive a payout from your business interruption coverage. Any claim you file will need to include documentation of the issues interrupting your business and how that translates into revenue loss. “You have to provide averages and proof of the accounts receivable,” said Engar. “Unless you can offer evidence, you are going to have an exclusion thrown at you.” 

Business Interruption Coverage and the Pandemic 

When shutdown orders, both government-mandated and those supported by professional dental organizations, swept across the country, practices typically operating on full schedules were suddenly relegated to emergency-only procedures or complete closures. Naturally, many dentists turned to their business interruption coverage for support, only to find the major losses caused by the pandemic would not be covered. 

The severe acute respiratory syndrome (SARS) outbreak of 2003 may have been the impetus for the insurance industry’s approach to coverage related to widespread viruses, according to Joseph A. Battaglia, DMD, FAGD, chair of the AGD Dental Practice Council. Most BOPs will likely specify that anything virus-related is a coverage exclusion. Engar recommends dentists talk to their insurance carriers to understand exactly what their current coverage entails. 

With the COVID-19 pandemic triggering widespread financial losses across so many industries (raising the question of what exactly is a “pandemic-proof” business), an outcry over the insurance industry’s lack of coverage was inevitable. So far, courts are largely siding with insurance companies on disputes over lack of coverage for pandemic-related losses. Cases at both the federal and state levels in multiple states have sided with insurance companies, although there are many more cases yet to be ruled on, according to the ABA Journal of the American Bar Association.⁴ As of October 2020, at least 1,250 cases have been filed across the country, according to The National Law Review.⁵

Advocating for Change 

While litigation will be ongoing, lawsuits are not the only response to the question of pandemics and business interruption coverage. As of August 2020, 10 states and the District of Columbia have introduced legislation requiring insurers to extend business interruption coverage to include claims related to COVID-19 and future pandemics.⁶

The first such legislation, introduced in New Jersey, called for insurers to cover pandemic-related losses during a state of emergency.⁷ AGD Advocacy sent out an action alert to members in the state, offering them a way to get in touch with legislators through the AGD action alert system. 

“I have never seen so many members share so many personal stories through an action alert,” said Ninia Linero, manager of government relations at AGD. “More than 1,000 messages were sent to the New Jersey Legislature.” 

The outpouring of support from AGD members drew the attention of bill sponsors, who reached out to AGD to learn more about how the pandemic-related business losses are affecting dental practices. “They were pretty frank that the intent was to bring the insurers to the table and to try to get them to do the right thing on their own,” said Linero. “The goal was not to force the bill through the legislative process, but that is still an option.”

The legislation ultimately stalled, and the insurance industry has yet to make significant changes, but it did draw national attention to the issue and inspire more states to introduce their own versions. AGD Advocacy has offered similar support in states like Ohio, Massachusetts and New York. 

While the future of such legislation is uncertain, it does shine a light on an important conversation. “The dental profession needs to be represented at the table,” said Battaglia. “Most legislators are aware of the needs of healthcare but not necessarily specifically in the dental realm.” 

Dental practices’ personal protective equipment (PPE) needs have been overlooked during the pandemic, and they have been forced to delay routine oral healthcare for their patients. But PPE is essential to keeping staff and patients safe in the dental environment, and oral healthcare is integral to overall health. Regular dental care helps keep patients out of emergency rooms. Calling legislators’ attention to these kinds of issues helps give the industry a voice. 

“We have to define ourselves as essential to a lot of the government and regulatory agencies so they can appreciate the risks that are involved with essential healthcare workers on the frontlines, keeping dental patients out of emergency rooms,” said Battaglia. 

What happens if further shutdown orders threaten dental practices’ and other businesses’ survival? What if another pandemic occurs? These are tough questions, but businesses are going to continue pushing for change in the insurance industry. “I think the insurance industry and the professional industry need to have a robust debate on exactly what risks are involved and what is truly an insurable risk,” said Battaglia. 

Preparing for the Future 

The resolution of the COVID-19 pandemic is still far from certain, and the potential for further shutdown orders remains. In the meantime, dental practices are shouldering additional costs for items such as PPE and new equipment related to patient and staff safety. 

“Costs are going up, and they won’t go down,” said Sireesha Penumetcha, DDS, MAGD, owner of Lakepoint Dental in Elk Grove, California. “Most of the disposable PPE supply prices went up by three times, and gloves have gone up almost six times their previous cost in March.” 

What can dental offices do to prepare for future challenges? 

• Maintain regulatory compliance. Follow state, public health and regulatory body guidelines. Keeping yourself, your patients and your staff members safe and healthy helps to keep the doors open. 
  
  
• Review your insurance coverage. Take a look at your practice’s insurance coverage, and read the fine print. “It is probably a good idea to call your agent today,” said Engar. “What are my exclusions? What happens if I have a claim? What can I do to minimize the problem I would have out of pocket? What can I do to lower my deductible or to get better coverage?” Evaluate your current business interruption coverage to help determine whether you need to negotiate changes, increase your coverage or explore other options. 
  
  
• Review your other contracts. Consider analyzing the fine print of other important contracts, such as your practice’s office lease. Is there any language covering what will happen in the case of a prolonged closure of your business due to shutdown orders? “My landlord was not giving us a break even though everything was shut down as mandated by the state,” said Penumetcha. “Look at [the details] before entering into leases going forward so that you don’t end up paying rent if the office is closed due to mandated or involuntary shutdowns for more than a month.” 
  
  
• Invest in reusable products. Some dentists are investing in reusable products with a higher upfront cost to save money in the long term. For example, Penumetcha invested in washable, reusable uniforms and reusable respirators instead of face masks for her practice. These types of investments can help save money and cut down on waste. “If there is a way to be innovative and invest in more expensive upfront but reusable products, that will be good in the long term for any dental practice,” she said. 

While the pandemic has been a hard lesson, the dental industry will endure. Its practitioners can focus on protecting their businesses with the resources available today and advocate for changes to the insurance industry going forward.

Carrie Pallardy is a freelance writer and editor based in Chicago. To comment on this article, email impact@agd.org. 

References 
1. “What does a business owners policy (BOP) cover?” Insurance Information Institute, iii.org/article/what-does-businessowners-policy-bop-cover. Accessed 26 Oct. 2020. 
2. “Business Interruption Insurance.” The Hartford, thehartford.com/business-insurance/business-interruption-insurance. Accessed 26 Oct. 2020. 
3. Henricks, Mark. “Business Interruption Insurance: What You Need to Know.” SmartAsset, 10 July 2020, smartasset.com/financial-advisor/business-interruption-insurance. Accessed 26 Oct. 2020. 
4. Cassens Weiss, Debra. “Insurers Rack Up Early Wins in Lawsuits over COVID-19 ‘Business Interruption’ Coverage.” ABA Journal, 2 Sept. 2020, abajournal.com/news/article/insurers-rack-up-early-wins-in-suits-over-covid-19-business-interruption-coverage. Accessed 26 Oct. 2020. 
5. Keen, Rachel E., and Jonathan Reid Reich. “COVID-19 Shutdowns, Related Litigation Pressure on Business Interruption Insurers.” The National Law Review, 26 Oct. 2020, natlawreview.com/article/covid-19-shutdowns-related-litigation-put-pressure-business-interruption-insurers. Accessed 26 Oct. 2020. 
6. Beeber, Jessie F., et al. “States Begin to Introduce Legislation: Business Interruption Policies Would Be Required to Cover COVID-19-Related Claims.” Venable LLP, 4 Aug. 2020, venable.com/insights/publications/2020/04/states-begin-to-introduce-legislation-business. Accessed 26 Oct. 2020. 
7. State of New Jersey, General Assembly. Assembly, No. 3844. State of New Jersey 219th Legislature, 16 March 2020, njleg.state.nj.us/2020/Bills/A4000/3844_I1.HTM.