by Rob Ammons, The Ammons Law Firm

Being a business owner right now is difficult. Between Coronavirus damage and orders from state and local governments, most businesses have shut down. While businesses are closed, fixed expenses (e.g. rent, utilities, insurance) drain cash reserves.  As commerce in many sectors of our nation’s economy has ground to a halt, most businesses have been forced to close, and for some, the only option has been to furlough employees.

Many business owners were diligent, purchased insurance, and paid premiums for years in order to have coverage for business losses. Often insurance agents and brokers promoted the insurance by describing the policy as a “safety net” in case there was a business interruption. But now when the coverage is needed the most, insurance companies and agents are telling businesses that their losses are not covered. One thing is certain: when it comes to protecting policyholders against business losses associated with the Coronavirus Pandemic, business owners are finding out that the insurance industry is not a good neighbor and not on their side.

Despite what businesses are being told, there may be insurance coverage for losses associated with the Coronavirus Pandemic. Whether a business is covered for the current interruption in its activities is a question that requires an analysis of the specific language of the insurance policy including all exclusions, a review of the government order closing local businesses, and knowledge of the legal precedent interpreting insurance policies. When it comes to insurance coverage, the specific language of the policy makes a difference. While some policies have formidable exclusions that arguably eliminate coverage, there are many variations in the policy language and some policies may not exclude coverage.

In connection with most business loss claims associated with the Coronavirus Pandemic, three things that to look for in a commercial property insurance policy are (1) business interruption coverage, (2) civil authority coverage, and (3) microorganism coverage or exclusion.

Business Interruption Coverage

Business interruption coverage ensures a business for losses caused when its normal business operations are disrupted. This coverage is usually bundled with other types of coverage under a business owner’s policy, but some businesses may have separate policies that cover business-interruption losses.

A feature of business interruption coverage you will want to be aware of is the standard policy language in most policies that limits coverage to losses caused by “direct physical loss of or damage to property.”   Based on the claim denial letters business owners are receiving, it appears that the insurance industry is taking the position that a virus in a business that attaches to surfaces, lives for days, is highly contagious and potentially deadly does not constitute any damage to the business owner’s property.

While no Court has yet ruled on whether the Coronavirus causes property loss or damage in a COVID -19 case, there are comparable situations where Courts have found the requisite property damage to invoke business interruption coverage. The language of the Harris County Judge’s Order that closed businesses should also be helpful to businesses when they challenge the denial of their insurance claims. Specifically, Harris County Judge Hidalgo’s Order states:

Whereas the COVID-19 virus is contagious and spreads through person-to-person contact, especially in group settings; and

Whereas the COVID-19 virus causes property loss or damage due to its ability to attach to surfaces for prolonged periods of time; and

Source: https://www.readyharris.org/Stay-Home

Based on this declaration, it can be argued that all businesses that are normally open to the public have suffered the type of property loss or damage necessary to trigger coverage under standard business interruption policy language.

Civil Authority Coverage

Many businesses have insurance policies that include “civil authority” coverage—a type of coverage for lost business income that should be available when your business is closed by order of a government entity. Seems clear. However, when it comes to insurance coverage issues, very little is black and white.

Insurance companies and their armies of lawyers are very creative when it comes to finding ways to deny coverage to businesses and policyholders. For example, after September 11, 2001, airspace was closed by the government. Airlines, hotels, restaurants, and other hospitality businesses were devastated by the loss of business they suffered due to the lack of airline travelers. Even though these businesses had civil authority coverage, insurers denied their claims, arguing that the government orders did not order that those businesses close. The same thing happened to businesses in Louisiana after hurricane Katrina.  In those cases, the Courts sided with the insurance company claiming that the businesses were never actually ordered to close. [1]

But Coronavirus is different. The position that the insurance companies took in the wake of these past disasters can be used against them now!  The same court decisions that favored insurance carriers in these past disasters can be used to make a strong case that civil authority coverage directly applies for business losses caused by government-ordered business closures due to the coronavirus.

Microorganisms

Since the outbreak of SARS in 2003, some insurance policies explicitly exclude damages caused by microorganisms. A standard insurance clause excludes payment “for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” Other policies, however, only exclude from coverage losses caused by bacteria, but not viruses like Coronavirus. Here again, a careful reading of the policy is crucial.

Insurers will likely also argue that standard policy language that bars coverage for damages caused by “pollution” or other exclusionary language applies to business losses caused by Coronavirus, and different courts have interpreted these provisions differently. So it is important that the specific policy language be reviewed by a lawyer familiar with the court decisions interpreting these provisions of the business insurance policy.

Finally, at least some policies that target the restaurant, gym, movie, healthcare, and similar industries industry explicitly provide coverage for losses caused by “communicable or infectious diseases,” without the need to show that the loss was the result of actual physical damage to property.

Conclusion

When business pay premiums for business interruption coverage, they expect to be covered if they are unable to continue normal operations. Business losses caused by Coronavirus are staggering. Business owners can expect the insurance industry to use every imaginable excuse to avoid covering these losses.

A prudent business owner should not rely on an insurance company or anyone beholden to the insurance industry to interpret the policy language or to tell them whether their business loss claim is covered. At the same time, it makes little sense for struggling business owners to incur more expense paying lawyers hourly fees to review their insurance policy language.

The Ammons Law Firm is currently reviewing business insurance policies under a contingency fee arrangement that requires payment only if a recovery is ultimately obtained for the business owner.  This means that a business which has already lost revenue due to the shut down does not have to incur any out-of- pocket expense.  Given the hefty premiums that business owners have paid for business loss insurance and the uniform way in which insurance companies are denying the claims, it cannot hurt to have a qualified lawyer review the policy language to determine whether payment may be owed for Coronavirus-related losses.

Rob Ammons is a business owner and the Founder of The Ammons Law Firm. He has been representing business owners and consumers in claims against insurance companies for over thirty years.

[1]See Kean, Miller, Hawthorne, D’Armond McCowan & Jarman, LLP v. Nat’l Fire Ins. Co. of Hartford, 2007 WL 2489711, at *4 (M.D. La. Aug. 29, 2007). But see Company Assurance Co. of Am. v. BBB Serv. Co., 593 S.E.2d 7, 7 (Ga. App. 2003); Narricot Indus., Inc. v. Fireman’s Fund Ins. Co., 2002 WL 31247972, at *4 (E.D. Pa. Sept. 30, 2002).

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Most of the clients we’ve worked with in our 48-year would disagree with his conclusion but probably understand his point.  Most families eventually gain some personal experience with the price tag of higher education costs.  If you are fortunate enough to be past this point, you may now be thinking about college funding for your grandchildren.

The bad news?  Quality college education is not getting cheaper.  In fact, the cost of higher education is escalating ahead of inflation.

The good news?  Advance preparation for funding a child’s or grandchild’s education expenses can make a major difference.

We have two basic tools in Texas that anticipate these financial goals.  Most families really want to know, “What is right for our situation?”

• 529 College Savings Plans (529 Plans) are much like a 401(k) plan without the upfront tax deferral. The money accumulates tax-deferred for future education costs.  You contribute money in a lump-sum or periodically.  It is invested in various investment vehicles like mutual funds.  Hopefully, it grows in value.  When the student named as the beneficiary reaches college, money is withdrawn to pay for qualified education expenses (books, tuition, room & board, and fees).  As long as funds are used for qualified expenses, no income tax is due on the gain in value.
• Texas Tuition Promise Fund® (TTPF) is a prepaid tuition arrangement.  You pay money to a fund managed by the State of Texas today and receive what amounts to a “coupon”.  Later, that coupon can be “redeemed” at various state-supported universities to pay for tuition and required fees, but not text books or room & board.   The advantage of purchasing the “coupon” today is to protect yourself or your student from the rising cost of tuition and fees in future years.  There are three variations of “coupons” that you can purchase – the least expensive providing guaranteed tuition and fees for two-year community colleges, and the most expensive designed to cover state universities which tend to cost the most.

What is best for a family depends on their situation.

1. The 529 Plans are the more flexible of the two arrangements.  They can cover the costs of virtually any institution of higher education – in Texas, out of state, public, or private.  The TTPF, while offering an option for the cost of tuition and fees at non-Texas universities and private schools, is significantly more restricted.
2. The TTPF provides a guaranteed outcome for your money.  If your child or grandchild attends a state university in Texas, you have an assured contribution toward the cost of tuition and fees, regardless of their amount in the future.  A 529 Plan may give you a better result from its investment returns, but that result is not guaranteed.
3. A 529 Plan, by itself, can form a single, total solution for future education costs.  The TTPF, because it is limited to only tuition and fees, cannot truly be a total solution by itself.
4. Both arrangements benefit under the tax code in much the same way if the money is used as intended.  In both cases, if the accumulated funds are not used as intended, there will be some income reported on your tax return and some penalty tax will apply.  However, neither approach enjoys any particular tax advantage over the other, given the present rules.

My colleague, Phillip Hamman, CFA, CFP® heads our Wealth Planning Committee which is a group of multi-disciplined professionals including lawyers and CPAs that strive to define our “best practice” disciplines for advice in this area.  Phillip commented after our last review, “In practice, we find that most families favor the 529 College Savings Plans as a means of funding future educational expenses.  Often, the flexibility with regard to where the money may be used and the fact that it can cover the full range of educational costs is the deciding factor.  However, every situation is different and a good plan calls for thoughtful consideration to each family’s situation and needs.  It’s highly personal and one size does not fit all.”

— Lauren Rich CFP® is a Wealth Advisor with Linscomb & Williams, a Houston-based wealth management firm established in 1971.

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Now that this year’s tax filing duties are history for most of us, taxes may not seem like a much of a pressing concern.

But pushing taxes onto the back burner for most of the year is a mistake, especially if you want to manage your tax liability as much as possible. A better approach is to actively plan for and manage taxes throughout the year, enabling you to make the most of strategies that could positively impact your tax bill.

Maximize contributions to your retirement plan accounts, including 401(k)s and IRAs. Although you may make tax-deductible contributions to some types of accounts, such as a traditional IRA and SEP-IRA, as late as your tax-filing deadline next year, there is nothing that says you must wait until then to make those contributions. It is actually easier to invest throughout the year and get that money working in your tax deferred accounts sooner.

If you are 70½ or older, take the required minimum distribution from IRAs and defined contribution plans between now and December 31. If you miss the end-of-year deadline, you face a costly consequence—a 50 percent excise tax on the amount not distributed as required.

Review your payroll withholding. The recent Tax Cuts and Jobs Act that overhauled the tax withholding applied to pay delivered a few surprises to some taxpayers when they filed their 2018 taxes this year. Although many have already adjusted their withholding, you may still need to modify your W-4 and make other adjustments. Visit with your tax advisor or CPA for assistance, and look for a helpful withholding calculator at apps/irs.gov/app/withholdingcalculator.

Be charitable. Many nonprofit organizations especially appreciate financial support during the slower summer months. You may be able to claim a tax deduction for your gifts made to qualified charitable organizations by making tax-deductible donations to your favorite nonprofit organizations before midnight December 31, as long as you have adequate documentation.

Make an appointment with your CPA, tax attorney and wealth advisor to review your financial plan and assess your tax strategy for 2019. What is working so far this year? What are you concerned about going forward? A midyear review of your progress and goals, including tax management and strategies, is an opportunity to reset and make adjustments.

Would you like more information? Contact Evans at 713.388.1367 or evans.attwell@frostbank.com.

Investment and insurance products are not FDIC insured, are not bank guaranteed, and may lose value.

Brokerage services offered through Frost Brokerage Services, Inc., Member FINRA/SIPC, and investment advisory services offered through Frost Investment Services, LLC, a registered investment adviser. Both companies are subsidiaries of Frost Bank.

Additionally, insurance products are offered through Frost Insurance.

Deposit and loan products are offered through Frost Bank, Member FDIC. 

Frost does not provide legal or tax advice. Please seek legal or tax advice from legal and/or tax professionals.

The post Tax-conscious actions for the rest of the year appeared first on Best of Heights.

It’s one of life’s most distressing experiences—the death of a spouse. Whether it is sudden or long-expected, the resulting emotions can leave the surviving spouse feeling confused, insecure and helpless just when he or she must take on some of the most critical financial tasks of a lifetime.

If you lost your spouse, what would you need to do to get through the first days of dealing with such a difficult life experience? It takes a plan, say financial experts, and some of the first steps are among the most important.

Assemble a “support team” that includes a CPA, attorney, wealth advisor and perhaps a trusted family member or friend with good financial skills and instincts. Especially in the first months, even simple tasks may seem too difficult to manage. Your team can help you when you’re least able to attend to details.

Take care of the essentials first. Some financial tasks can and should wait until you have a clearer idea of how you want to move into the future. Others can’t be put off. Among those that need immediate attention:

• Order 10 to 25 certified copies of the death certificate to provide to insurance and service providers who request a copy.
• Locate important documents, including the will, trust documents, powers of attorney, financial statements, insurance policies and personal property documents. You’ll also need Social Security numbers, birth and marriage certificates, vehicle titles and property deeds.
• Contact your spouse’s employer to determine what benefits, such as unpaid salary and bonuses or stock options, you might be entitled to claim.
• Contact banks, pension plan administrators, insurance companies, credit card companies and other organizations where your spouse had accounts. Also notify Social Security.
• File to collect life insurance benefits for which you are a beneficiary.
• If you are not the executor of your spouse’s estate, meet with the designated executor to discuss what steps he or she will be taking to settle the estate.

Postpone large life decisions until you’re on an even keel emotionally. Although putting your house on the market or moving across the country may seem reasonable in the moment, taking life-changing steps before you’ve had time to recover your equilibrium could be a mistake. Take a breather, get the counsel of professionals and think through how you want to move forward before you make major changes that are difficult or impossible to reverse.

Would you like more information? Contact Evans at 1.713.388.1367 or evans.attwell@frostbank.com.

Investment and insurance products are not FDIC insured, are not bank guaranteed, and may lose value.

Brokerage services offered through Frost Brokerage Services, Inc., Member FINRA/SIPC, and investment advisory services offered through Frost Investment Services, LLC, a registered investment adviser. Both companies are subsidiaries of Frost Bank.

Additionally, insurance products are offered through Frost Insurance.

Deposit and loan products are offered through Frost Bank, Member FDIC. 

Frost does not provide legal or tax advice. Please seek legal or tax advice from legal and/or tax professionals.

The post Survival strategies for surviving spouses appeared first on Best of Heights.