The current coronavirus pandemic is having a negative impact on both families and businesses worldwide, causing economic hardship that may be impossible for some businesses to overcome. Many businesses have been forced to either temporarily close or have seen a sharp drop in customers due to COVID-19, and although many have been able to get loans under the federal government’s stimulus package, for some, that has not been enough to stay afloat. For those businesses, many owners are looking at their insurance policies — most importantly, business interruption insurance — in order to determine if they are potentially covered for the loss of business.
What Is Business Interruption Insurance?
Business interruption insurance is designed to prevent events from leaving a business devastated financially, most often a hurricane, tornado, or other weather event. Also known as “business continuation insurance,” business interruption insurance is designed to cover the loss of income after a business suffers a disaster-related closing — in some cases, throughout the rebuilding process. It expands coverage beyond insurance for property damage to cover more extensive losses as well.
What does that mean for those whose businesses are closed during the COVID-19 pandemic? Many policies rarely mention disease outbreak, and generally, the insurance covers fire, transport network disruption, IT outage or cyberattack, industrial dispute, and civil unrest, which lead to physical losses. Pandemics would not traditionally be covered under such a policy, but many businesses are filing suit against insurance companies to force a claim.
What Would It Cover?
If a business interruption insurance policy covered COVID-19, businesses would be able to recoup losses including:
- The actual loss sustained by the business interruption, including loss of income.
- Business income, including net income and operating expenses, such as payroll.
- Period restoration, which in the case of a disaster would include the time required to restore the business’s damaged property.
- Extra expenses that would not have occurred if there was no damage to the property.
- Extensions of coverage, which addresses losses caused by damage to gas, water, sewer, telephone, or electrical service.
- Interruption by military or civil authority, which covers losses sustained when either the military or a civil order forbids entrance to the business for a period of at least 14 to 30 days. While the government ordered shutdowns of most businesses, it is unlikely coronavirus pandemic losses will be covered.
- Contingent business interruption losses are caused by damage or destruction of property owned by a third-party supplier or receiver that would negatively impact your business, and are also often covered.
Lawmakers, however, are encouraging insurance companies to cover COVID-19 losses under business interruption insurance, likely so the entire cost of the pandemic does not fall on the government, and businesses are better able to recover from the drastic loss of income many have sustained.
Some Policies Do Have Coverage
Some – but only a few, mostly larger firms – have business interruption policies containing coverage for Interruption by Communicable Disease. Still, the policy’s language may exclude viruses such as COVID-19. Contact an insurance claim lawyer, like an insurance claim lawyer in Delray Beach, FL, for more information today.
Thanks to the law office of Eric H. Luckman, P.A. for their insight into whether or not your business can get insurance if it closes due to the COVID-19 pandemic.