Large and small businesses throughout the country have been wondering if any of their insurance policies will cover any of the losses they are sustaining because of the Covid-19/Coronavirus outbreak.
It’s impossible to give a general statement because whether there is coverge depends entirely upon the wording of your policy.
Insurance companies, of course, don’t want you making claims so they are quick to get out in front and proclaim that no coverage exists. An example of insurance companies trying to convince you that you don’t have claims can be found here.
However, despite the protests from the insurance companies, there are at least three common types of coverage that might provide some protection for businesses.
Business interruption insurance.
Business interruption insurance covers your losses when your business is interrupted by a covered loss. The big question in these claims is “What is a covered loss?” As mentioned earlier, the key to this is the actual language in the policy.
Most policies only cover losses from direct physical loss or damage to covered property. Insurance companies are arguing that the Covid-19 virus can never cause a physical loss. I think this is wrong. If your business is actually infected by the Covid-19 virus, where you need to close down and decontaminate, there is caselaw from around the country to suggest that infection by the Covid-19 virus would be “property damage”. Admittedly, most businesses aren’t closing for this reason, but there are good arguments that these types of losses would be covered.
Additionally, many policies have different requirements or at least ambiguous requirements for coverage. It is worth having a lawyer check out your policy to see if your loss would be covered.
Finally, many policies in the healthcare and hospitality industries cover losses caused by infectious diseases, even when there is no property damage.
Contingent Business Interruption Insurance
Contingent business interruption insurance covers your losses from property damage to your suppliers or customers. For example, if your main supplier is shut down by an outbreak of the virus in their factory, you might have coverage. Do you have one main customer affected by the virus? You might have coverage. There might be more types of claims covered under this coverage.
Civil Authority Insurance
Civil authority insurance provides you coverage in connection with a governmental order preventing access to your location. As you know, mayors and governors across the country are ordering shutdowns of non-essential businesses. Part of the reason is to enforce social distancing, and part of the reason is the realization that the Covid-19 virus can damage business property and spread the disease further. Again, the wording of various policies is important, but many civil authority provisions may provide coverage to cover some of the losses your business sustains due to governmental shutdowns. Some policies may required a complete prohibition on the use of your facilities. Some policies may just require that the use of your facilities is impaired (think restaurant dining rooms being closed). The exact wording of your policy in these claims will be critical.
Is There An Exclusion That Applies?
Even if coverage exists, you must still prove that no exclusion applies. Here, insurance companies are suggesting to the public that most policies have a virus exclusion so that any claim would not be covered. This is a stretch. Even assuming that such an exclusion is dispositive (and we don’t agree with that), many policies don’t have a virus exclusion. In fact, many policies have riders that specifically provide coverage for virus protection so that there is no argument about what is covered. Again, it’s important to get an attorney to read your policy so the lawyer can advise you whether you might have arguments for coverage.
Get The Advice Of A Lawyer
Every restaurant and most businesses affected by the Covid-19/Coronavirus outbreak may have a claim on their insurance policy. But whether or not a claim is viable is completely dependent upon what your policy says. Don’t take your insurance company’s word for it that no covered claim will exist. Instead, get a lawyer to go over your policy with you so that you can make an informed decision about whether you might have a claim.
UPDATE- PRESIDENT AND LEGISLATIVE PRONOUNCEMENTS
Since I wrote, the President mentioned business interruption insurance in one of his coronavirus briefings, and he seemed to indicate that the government would somehow make insurance companies pay on these policies despite any claims that current situations are excluded. Additionally, some state legislatures have also started discussing legislation that would force insurance companies to cover Covid-19 related claims. Right now, I think it’s possible that you could see governmental action on this accompanied by an infusion of cash from the government to insurance companies to help the companies pay for the claims.
With the potential that the government might intervene, it’s more important than ever to seek a lawyer’s advice on these issues.
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