Does Business Interruption Insurance Cover COVID-19 / Coronavirus?

TL;TR | No, there is no business income coverage. This is the short answer.

As the US economy works to mitigate the evolving coronavirus / COVID-19 crisis, businesses are understandably concerned about the potential financial impact the continued global spread of coronavirus may have on their operations.

As of March 23 2020, Non-essential businesses in CT have been forced to close due to Gov. Lamont’s coronavirus executive order, which could last for weeks. If you’re amongst those businesses, now is your time to seek financial support to stay afloat.

Here’s what we can tell you about business interruption insurance/income loss insurance and its protection against the COVID-19 crisis.

What Does Business Interruption Insurance Cover?

Business interruption insurance, sometimes called income loss insurance, is intended to protect businesses against revenue losses sustained as a result of their operations. Business interruption insurance usually covers the following things:

• Profits you would have earned during the duration your business was not operating
• Fixed costs include operating costs and expenses that you would continue to pay even though your business is out of action
• Temporary location are the costs and expenses related to moving your business to a different location while you rebuild your permanent location
• Disruption covers the costs and expenses related to the interruption caused by service providers such as telecommunications, water, and power
• Additional expenses and costs reimburses businesses for the costs of rebuilding parts of their location while they continue to operate from the location
• Civil Authority Ingress/ Egress occurs when the government instructs the closure of a business that results in financial loss

 

Does Business Interruption Help a Company Affected By the Spread of Disease like COVID-19?

Not exactly, but there is hope. This is where contingent business interruption coverage comes into play. This is a policy that provides coverage for losses resulting from disruptions to a company’s customers or suppliers, as long as the underlying cause of damage to the customer or supplier is of the type covered by the insured business owner’s own property policy.

If the insured company has contingent business interruption coverage, and civil authority interrupts the business of the insured’s supplier or customer, the insured may also have coverage for its own indirect loss of income.

 

Where Things Get Tricky…

In many commercial property insurance policies, business interruption coverage is triggered when the policyholder sustains “direct physical loss of or damage to” insured property by a covered cause of loss. In the event of a claim for COVID-19-related business interruption, certain insurance carriers may dispute whether this “physical loss” requirement has been met.

Policyholders should keep in mind, however, that courts across the country have not settled upon a uniform rule for when the insured property has suffered a “physical loss.”

Courts in a number of jurisdictions have determined that contamination and other incidents that render the property uninhabitable or otherwise unfit for its intended use constitutes a “physical loss” sufficient to trigger business interruption coverage.

The determination of whether “physical loss” has occurred will, therefore, continue to require a close examination of the particular facts of each case.

 

Conclusion

The takeaway here is that a business that suffers business interruption losses due to the spread of COVID-19 should check its commercial property policy to determine if it has business interruption or contingent business interruption coverage. The scope of coverage will ultimately depend upon the specific language of each insurance policy.

Additionally, the Insurance Services Ofice (ISO) continually monitors emerging issues and trends that may affect. The insurance industry and the unknown ultimate result of this virus certainly qualify as an emerging issue. In response to the Coronavirus, and because many if not most policies contain a virus exclusion, ISO created two business income endorsements as a specific response to the Coronavirus:

• Business Interuption: Limited Coverage For Certain Civil Authority Orders Relating To Coronavirus ─ Edition February 2020; and
• Business Interuption: Limited Coverage For Certain Civil Authority Orders Relating To Coronavirus (Including Orders Restricting Some Modes Of Public Transportation)─ Edition February, 2020

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