Does a PPP loan impact insurance coverage?

Coverage Q&A: A restaurant that was closed during protests last year is seeking business income loss coverage.

The Paycheck Protection Program (PPP) provides loans to help businesses keep their workforce employed during the coronavirus health crisis. (Photo: Ryan Rodrick Beiler/Shutterstock; Castleski/Shutterstock; tankist276/Shutterstock)

Every claim is different, and some insurance policies can be difficult to interpret for unique situations. FC&S Expert Coverage Interpretation, the recognized authority on insurance coverage interpretation and analysis for the P&C industry, makes it simple to find credible answers to your complicated coverage questions. Analysis brought to you by our FC&S experts. 

Editor’s Note: Our question this week looks at how loans and stimulus payments during the COVID-19 pandemic impact a restaurant’s business income loss.

Question: My client, a restaurant, suffered physical damage when a brick came through a window during social unrest demonstrations last year. The restaurant closed for several days to clean up and repair the damage. 

We submitted the claim to the carrier, and the carrier paid lost income but refused to pay for payroll that the restaurant continued to pay employees during the shutdown. The policy is ISO-based and states that it will pay the actual loss of business income you sustain. The carrier says that because the restaurant received a Paycheck Protection Program (PPP) loan, the PPP loan is paying for payroll, and the restaurant suffered no loss. We believe the PPP loan (not yet forgiven) has nothing to do with the policy language. Your thoughts?

— Georgia Subscriber

Analysis: Coverage questions concerning business income and related losses are among the most frequent inquires we receive from subscribers. It isn’t that it is such a difficult coverage, but rather because there are so many different types of actions that can cause a business to shut down and because of the complications that can arise in getting the business back up and running again following a loss. With the coronavirus pandemic occurring simultaneously with social unrest, small businesses, in particular, have been experiencing long periods of closure and additional expenses to keep employees and customers safe. Some of these businesses have received loans and stimulus payments.

Answer: To learn the answer to this week’s coverage Q&A, please log into your FC&S Expert Coverage Interpretation account.

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