How Business Insurance Responds To COVID-19 

After weeks of shelter-in-place orders, crashing markets and industries decimated virtually overnight, business owners can’t help but embrace reality and prepare for the long-lasting impacts of COVID-19. As part of the process, it’s crucial to understand how business insurance responds to COVID-19-related issues.

So how can various types of business insurance help companies get through the pandemic? Here are the insurance coverages and major factors — operational, political and regulatory — that can make or break coverage in this trying time.

Business Interruption: Physical Damage And Civil Authority Issues

The business interruption (BI) feature of a property insurance policy responds when a business is inoperable due to physical damage, such as a fire or structural damage. Disasters of this caliber can quickly, albeit temporarily, close businesses, resulting in severe loss of income. Some policies also include coverage for civil authority interruptions, which is when a governmental authority orders the closure of businesses. In both cases, claiming income losses typically triggers BI insurance to respond.

Unfortunately, recovering COVID-19 losses under a Property policy is an uphill battle at the moment.  It’s highly unlikely that, under most policies, insurance carriers will qualify COVID-19 BI losses as caused by physical damage or a civil authority claim. We’ve seen this already in the declination letters received from many carriers.

Physical damage requires direct physical damage to the property and many insurers have taken the position that direct physical damage does not exist under the current circumstances. While some business owners have sued, claiming that the virus can be present on surfaces in their office or store, therefore directly physically damaging it, courts are far from resolving this dispute. Most policies have a standard virus exclusion that may also exclude coverage. Furthermore, claims based on civil authority are being declined because police have not physically cordoned off spaces, which is typically required for a successful recovery under this coverage.

For further discussion or to answer specific questions about your coverage or circumstances, please give us a call.