Will Business Interruption Insurance Cover Your Business’ Losses Resulting From COVID-19?

The answer to this question will depend upon the language of your policy.  Most business interruption insurance policies, however, will have coverage language and exclusions that will make it unlikely for a COVID-19 claim to be covered. It would be prudent to have your attorney review your policies and assist you in making any appropriate claims in accordance with the notice requirements of the policies.

Following viral outbreaks in recent years such as the H1N1 virus and the Ebola virus, many insurance providers have excluded from coverage any claims resulting from bacteria or viruses such as COVID-19.  The Maryland Insurance Administration explained in a recent advisory: “All insurance policies have exclusions of coverage for risks that are too great to be underwritten at an affordable price.  … Global pandemics like COVID-19 usually fall into this category.” https://insurance.maryland.gov/Pages/newscenter/NewsDetails.aspx?NR=2020256

These are the main types of business interruption insurance, and some of the issues you will face if you seek coverage under these types of policies:

(1) Business Interruption Coverage

Business interruption insurance policies generally provide coverage for lost income and related costs in the event that your business has been unable to operate. Most such policies, however, require “direct physical loss or damage” to property in order for the coverage to be triggered.  Insurers will likely deny many claims based on the fact that the insured suffered no “direct physical loss or damage” to insured property.  There will likely be disputes over whether “direct physical loss or damage” might exist when a property has been contaminated by an individual with a confirmed case of infection.  If this is your situation, you should discuss the specific facts with your attorney, based on the specific language in your policy and any applicable exclusions.

(2) Business Interruption Coverage Extension – Civil Authority

Some policies provide extended coverage for loss of business income when an order of a civil authority prohibits access to the property. These extensions usually still require physical loss or damage to insured property, but some provide coverage if a nearby property sustains such physical loss or damage. The mandatory government orders that non-essential businesses close their doors in order to mitigate the spread of COVID-19 might constitute a civil order prohibiting access to property, but you will still need to establish “direct physical loss or damage” to property specified in the policy. Again, you should review your policy with your attorney to assess your ability to obtain coverage.

(3) Contingent Business Interruption Insurance

Contingent business interruption insurance policies provide coverage for lost income and related costs caused by business interruptions in upstream suppliers or downstream customers. These policies often require direct physical loss or damage to the property of the upstream suppliers or the downstream customer, which may be a significant hurdle in the COVID-19 situation. Additionally, these policies may require insured parties to list specific upstream and downstream parties and locations, excluding from coverage all those omitted.

(4) Other Endorsements or Extensions

Commercial property insurance policies sometimes have endorsements or extensions providing coverage for business interruption losses caused by illness, communicable disease, crisis management, cleanup, or cancellation of bookings. It is important to read your policy carefully with your attorney to determine if any of the specific provisions may provide coverage for losses related to COVID-19.