- On April 2, 2020
Dealing with business losses associated with COVID-19? Find out business interruption insurance can help and what to look for in your policy.
As COVID-19 continues to spread, state and local authorities have shut down non-essential businesses in cities across the U.S. As businesses are impacted by mandatory “shelter in place” rules, many are wondering if business interruption insurance can help.
The answer is it depends.
Most businesses have commercial property insurance, but not all policies include business income coverage. Business income coverage or business interruption coverage is separate, and coverage is contingent on the type of policy/coverage, type of loss, and interpretation of “damages.”
The easiest way to know and understand your coverage is to request a free policy review. Our experts are available and ready to help. Click here to get started.
Types of Business Interruption Coverage
The three most common types of coverage include business income coverage, contingent business interruption coverage, and civil authority coverage.
1. Business Income Coverage
This type of policy covers a loss of income to a business due to closed operations during a period of restoration after a covered loss physically damages the covered property. For example, a fire burns down a restaurant, and the business must close. Business income coverage would kick in and payout during the restoration process.
Is COVID-19 covered by business income coverage?
Possibly. COVID-19 is unlike a fire, flood, hurricane, or other catastrophic events that would physically (and visibly) damage property and trigger a claim. Unless COVID-19 was found on location, and that is what caused the shutdown of business, it might be hard to get coverage. However, there are a few existing rulings for arguing that this situation should be covered, even though the COVID-19 damage cannot be physically seen the same way a fire would. For example, in prior cases involving asbestos contamination, some courts have indicated that the presence of asbestos, even though it did not cause physical damage to the property, might constitute covered property damage.
2. Contingent Business Interruption
This additional coverage applies when damage/interruption occurs to a business because vendors, suppliers, etc. are impacted. Just like with business income coverage, the damage must first be a “covered peril” for this type of coverage to kick in.
Does contingent business interruption insurance cover COVID-19?
An insured may be able to argue coverage if their supply chain, manufacturers, etc. were contaminated with COVID-19.
3. Civil Authority Coverage
Commercial property damage insurance policies often include civil authority coverage. This means business losses would be covered if a civil authority prevents/stops/limits access to the insured’s property. These policies often have very specific requirements and payouts, including only starting coverage after 72 hours of continued restricted access and only paying for losses up to 30 days.
Does civil authority coverage cover COVID-19?
Possibly. For example, Broward County in Florida released an emergency order shutting down all non-essential businesses. Other states, cities, and municipalities are issuing similar orders. These “shut-downs” would qualify for coverage.
Things To Know
The type of policy, amount of coverage, and interpretation of damage will determine if insurance claims filed in response to COVID-19 are approved.
Also, understanding policy coverage is paramount for any insured thinking about filing an insurance claim for COVID-19 related losses – especially when it comes to exclusions. In recent years many carriers have added exclusion that would prevent claims “caused by or resulting from any virus, bacterium or other microorganisms that induces or is capable of inducing physical distress, illness or disease.”