Assessing business interruption claims for real estate owners


BI claims claims related to real estate. The pandemic did not stop fires, floods, looting and other physical property damage, and an increase in cyberattacks from impacting the businesses that continued to operate during the past year. (Photo: Ezume Images/stock.adobe.com)

The COVID-19 pandemic has certainly created difficulties and presented obstacles for every man, woman and child. Perseverance, determination and innovation are the abilities that have kept us all afloat, especially businesses, over the last 15 months. The pandemic has affected all industries undoubtedly, and some select niches for the better.

Take the real estate market, for instance. While some landlords have continued to collect their rent without fail, others have had to create ways to hopefully collect all rent due before the tenant moves out, usually offering additional consideration/discounts for renewals and tacking on the prior unpayable rent due/foregone to the end of the lease.

For restaurants, delivery and expansion of square footage became an absolute necessity. Many cities enforced sweeping capacity restrictions, leaving the most resourceful businesses to figure out how to take up sidewalk and parking lot space for the sake of increasing square feet.

The pandemic, however, did not stop fires, floods, looting and other physical property damage, as well as an increase in cyberattacks from impacting the businesses that were able to hold it together during the past year. As such, the operational post-pandemic history is very important to consider when assessing a business interruption or business income (BI) claim.

A few scenarios with some contrasting considerations:

  • Simple & traditional loss of rent claims are being paid as if COVID-19 did not exist — the lease indemnifies the landlord. Thus the contract should sustain (through to the insurance contract indemnification, which is usually 12 months plus some consideration of an extended or “ramp-up” period).
    • However, if the insured/landlord provided rent abatements during the pandemic without a definitively documented end date, there may be justifiable reasons to consider reducing the gross rental income loss for a commensurately applicable amount.
  • Some businesses, such as buffets, moved to “per plate” pricing resulting in nearly double historical profit margins;
    • Others have turned to and become critically dependent on delivery (e.g., Uber Eats, GrubHub, etc.).
      • Movement such as this has financially resulted in lower in-house payroll but a similar expense for the delivery fees.
    • Others have expanded their seating areas and respective capacity by absorbing sidewalk and/or parking lot space.
    • While others only made 50% of what they did pre-COVID-19, especially due to the capacity restrictions.
      • We note Miami’s restrictions have been much more lenient than New York City and Los Angeles.
  • Hotels, especially in NYC and other tourist-dependent locations, are in dire straits;
    • While others managed to sustain by accepting…



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