Is Coronavirus Covered by Business Interruption Insurance?
March 30, 2020
If you own a business, chances are you’ve taken steps to protect your employees and support customers during the Covid-19 outbreak. You’ve probably also previously implemented measures to mitigate risks including purchasing insurance. You may be wondering now what coverage if any your insurance policy may provide you for this uncharted territory. If you haven’t already, now is the time to bust out your insurance policy to determine whether you may have a business interruption claim due to the pandemic.
The viability of coverage for a coronavirus-related loss will depend significantly on the specific terms and conditions of the policy. While every policy varies, business interruption coverage is often included as part of a commercial property insurance policy. In a standard policy, coverage is triggered when a company suffers “direct physical loss of or damage to” the insured property as the result of a “covered cause of loss.”
To put it another way, a mere interruption to business by itself may not be enough to trigger coverage. To obtain coverage resulting from the pandemic, the existence of the coronavirus would need to constitute a “covered cause of loss,” which results in “physical loss of or damage to” the insured property. These requirements could potentially be satisfied if there is a demonstrable presence of the coronavirus in your workplace or in one of the locations of your suppliers. Needless to say, courts will be evaluating new arguments and angles based on the specific policy wording.
If you can show direct physical damage to covered property, or in the event that your policy does not require it as a trigger for coverage, you’ll need to check to see if your policy has any applicable exclusions for virus-related losses. Some policies contain a provision excluding for “Loss Due To Virus Or Bacteria” or something similar. The language, limits, and extent of these exclusions will certainly be tested by both insurers and insureds under the many unique circumstances created by this pandemic.
There are several specialized insurance policies and extensions of coverage added to standard policies expressly provide coverage for losses caused by “communicable or infectious diseases” without requiring physical damage to insured property. If you have one of these policies, you may have a significantly higher likelihood of establishing coverage depending on the policy language and the harm to your business. Ultimately, it is important to promptly review your policy, track losses, and notify your insurer of claims even if there are issues or questions that may turn out to preclude coverage.