Business interruption insurance is included in many companies as part of their Commercial Property and Casualty Insurance. While not every policyholder may be entitled to insurance coverage, in the COVID-19 scenario, business interruption insurance could be a source of insurance coverage, and policyholders should work with their professional advisors and check the specific terms of their policy.
We also heard that several insurance firms are summarily denying claims on the grounds that COVID-19 has not caused any physical damage, or for excluding pandemics, epidemics, and viruses from the relevant policies. However, it is not advisable to simply assume that a non-coverage response is correct based on blanket statements from insurance companies, or even agents and brokers. The specific terms of the policy itself should be carefully read by an independent consultant who is qualified to read and evaluate the complicated contractual language.
In addition, recent legislation proposed in seven U.S. states and the U.S. House of Representatives would overrule recent denials by insurance companies and force commercial property insurers to provide retroactive coverage to insured businesses for COVID-19 pandemic losses. While we can not say whether such legislation will be adopted, it is even more relevant for policyholders to now examine their business Interruption policies and consider whether to make a claim.
Business loss and Interruption Coverage
Standard commercial property insurance policies usually include one or more "time element" coverages that protect insured against reduced earnings and additional expenses due to physical loss or damage to the property they use to conduct business or, in the case of "contingent business interruption" coverage, the property of clients, suppliers or others that are essential to the business of the insured.
Is COVID-19 covered under the All-Risk Business Interruption Policy?
According to our sources, several insurance firms are summarily denying claims on the grounds that COVID-19 caused no physical damage.
We consider two typical examples of COVID-19 claims brought under the Business Interruption Policy:
i) In the first example, which may have a higher likelihood of success, is where a specific occurrence of COVID-19 occurred in the insured premises, such as where an employee infected with COVID-19 was present at the insured premises
(ii) In the second example, there is no clear allegation of COVID-19 in the insured property, where the loss occurs because the governor ordered their businesses to close due to the emergency COVID-19.
In the first case, the fundamental question is whether the mere existence of the virus in insured premises will cause or constitute "physical damage" and whether such damage has led to the loss of revenue. The answer is probably yes. One may argue that the presence of microscopic organisms such as COVID-19 is actually direct physical loss or damage that triggers coverage for business interruptions. Assuming that there is no particular exclusion for pandemics, epidemics and viruses in the policy (we understand that such exclusion is normal, however, we are aware of many situations where such exclusion does not exist), insurance may cover both the cost of cleaning and remediation of COVID-19 at the premises, but also the loss of profits as a consequence of the closure of the company for this remediation.
In the second example dealing with losses due to an emergency order from the governors, although this might be a more difficult claim to make, the response depends on specific language in the policy and also where the loss happens in the US State. For example, in some regulations, the terms of the Business Interruption policy include "all risk of physical loss or damage." It is important to use the conjunctive "or." The policy also covers "all risk of physical loss" as well as "all risk of damage." Thus, damage can be broader than mere physical damage. Depending on the jurisdiction, some courts provide that there has been a sufficient loss to qualify for coverage if events arise where the insured can no longer use the property for his intent, even though the physical structure itself has not sustained any damage.
If you have incurred business losses due to COVID-19 then contact the Best Lawyer in New Haven, CT.