Business Interruption Insurance and COVID-19
Business interruption insurance policies are individually crafted based upon the insurance provider and insured’s business. Compensation may be available in cases where the federal or state government ordered businesses to close or reduce operations. Further compensation may be available where businesses have incurred additional costs to continue business operations, such as sanitation/disinfecting services or the purchase of equipment for remote work.
Types of Coverage
A policy’s coverage of damages due to COVID-19 will come down to the insurer’s specific policy language, including various coverages and exclusions. However, there are four types of coverage that are generally available and may be applicable to address business losses:
- Business Income Coverage. Pays for loss of business income due to necessary suspension of normal business operations. This suspension of operations may arise directly from contamination of the facility from COVID-19; a state or local authority’s order; the need to protect employees/customers; or a myriad of other or concurrent causes which impact the use of your business and property for its intended purpose.
- Civil Authority Coverage. An additional coverage that pays for losses caused by action taken by civil authority that limits or precludes access to the area surrounding your business, thereby impending access to your facility.
- Dependent Property Coverage. An additional coverage that pays for losses arising from the shutdown of operations of another business, such as suppliers, retailers or companies that attract customers to the business.
- Extra Expense Coverage. An additional coverage that pays for expenses incurred to restore your business operations or to avoid/minimize the suspension of business operations.
Anticipated Hurdles
Many insurance companies will deny claims arising from this pandemic by attempting to rely on exclusions or other policy language. Anticipated hurdles in litigating these cases include:
- Lack of Typical Physical Loss or Damage. These terms are not always defined, and definitions may vary across insurers. These terms are also subject to various interpretation, and as such, have been the subject of prior court decisions nationwide. Examples of non-typical physical loss or damage have dangerous surrounding conditions; presence of dangerous or noxious gases; order; and smoke infiltration.
- Exclusions. Does the policy contain an exclusion for losses caused by viruses or pandemics? Not all policies have such exclusions or variations. If your policy contains such an exclusion, is the language ambiguous? Can the insurance company meet its burden of proof on the exclusion? Are there concurrent causes that would provide for coverage?
If you have incurred an interruption of your business and would like your policies of insurance reviewed to determine the availability of coverage, call/email Paul Weber at 410-266-0626 or pweber@hwlaw.com.
