COVID-19 and Business Interruption: Additional Burden for the Oil and Gas Industry

A severe drop in oil and gas prices, occurring at the same time as the COVID-19 pandemic, has hit the U.S. oil and gas industry with a one-two punch.

Many companies struggling during the current economic slowdown want to know whether their commercial property insurance policies will cover disruptions in operations caused by the COVID-19 pandemic. 

While some commercial policies may include this coverage, the burden is on the policyholder to quantify losses caused by the covered event. If other intervening factors unrelated to the covered event are present, the policyholder must make sure those unrelated factors are properly accounted for in the analysis. 

This may create challenges for companies in the oil and gas industry seeking to claim losses for business interruption due to the effects of the COVID-19 pandemic.

Insurance companies are likely to challenge such claims if it can be argued that a particular business downturn is the result of other factors. These are often referred to as non-cause-of-action factors.

Insurers may also argue that there is only partial causation, or that the policyholder failed to reliably separate losses caused by the covered event from losses related to non-cause-of-action factors. As a result, these business interruption claims can often involve very sophisticated and detailed analyses. While these issues can certainly arise with policyholders in other industries, the widespread and well-documented negative economic effects unrelated to the COVID-19 pandemic that the U.S. oil and gas industry is currently experiencing will need to be addressed. 

Weaver’s forensic and litigation services professionals have extensive experience analyzing and calculating losses and damages in conjunction with business interruption or related insurance claims, as well as in other types of litigation. On the business interruption side, we work with both policyholders and insurance providers. We also work with law firms that have broad experience in all types of these matters. If you have any questions about this or other forensic and litigation issues, contact us today.

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