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COVID-19 and Business Insurance

The devastating impact of Covid-19 has prompted many businesses across America to put their insurance companies on notice of business interruption claims.

The goal of Business Interruption is to replace the income of the insured that is lost as a result of the suspension of operations. Depending on the terms of the policy, recovery may also be available for damages resulting from certain orders by civil authorities that prohibit a business from engaging in its usual operations.

One of the most difficult hurdles for an insured to clear in pursuing a COVID-19 related claim under a Business Interruption policy is the requirement that the losses be caused by the direct physical loss of, or damage to, property at the premise described in the declarations.  For the civil authority coverage to be triggered, many policies provide that the governmental authority must prevent access to the premises described in the declarations of the property policy.

Furthermore, many Business Interruption policies contain “virus exclusions” that were written in response to the 2003 worldwide spread of SARS: “Exclusion for Loss due to Virus or Bacteria.” These exclusions began appearing in Business Interruption policies to avoid coverage for events like COVID-19.

Although there are hurdles to overcome, companies should not be discouraged by the difficulties relating to the application of the policy language to business losses due to COVID-19. A number of states are introducing bills that would force insurance companies to pay COVID-19 related claims, even when “viruses” are specifically excluded from Business Interruption Policies.

Several lawsuits have also been filed against insurance companies seeking coverage for Business Interruption losses.

While courts and lawmakers are addressing these issues, companies should take proactive measures such as Review their policy; save all their records; document all their losses, determine the notification period, and the documentation and actions prescribed by the insurance company before making a claim; obtain information on time limits imposed by the policy to bring a lawsuit, and identify the correct jurisdiction for resolving disputes.

In addition, consider hiring an attorney to review the policy, in order to help navigate this process and determine your company’s legal options, as policy language can often create confusion.

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