COVID-19 is interrupting and disrupting local, national and global businesses.  As a result, these businesses are losing income and customers as well as incurring additional expenses due to the disease. 

This will likely lead to an increase in insurance claims against insurance policies offering business interruption and/or contingent business interruption coverage. Whether the claims are covered will depend on the terms and conditions of the insurance policy and the circumstances of the loss.

What Is Business Interruption Insurance?

A business interruption policy typically covers lost profits which would have been earned had there been no interruption of normal business operations. Business interruption coverage is often part of a commercial property policy.

Because of this, when the business interruption insurance is an endorsement or addition to a standard commercial property policy, physical damage to the business property is required before the business interruption coverage is triggered.

One possible example of this is if there was a fire that caused property damage to the building where the business operated which then resulted in lost profits; this is the kind of instance that a business interruption policy would likely cover. 

Business interruption by itself is oftentimes not enough.

Civil Authority Coverage

However, some Business Interruption or commercial property policies may include coverage for losses caused by forced closure of property by a civil authority such as a local government.

This type coverage typically applies when a policyholder is unable to access its property due to a government order.  Usually only government orders causing a business to close will constitute a civil authority order.

If a business closes because of government action that does not rise to the level of an order, such as an advisory to stay off the streets following a hurricane, then there will probably be no civil authority coverage.

Virus, Disease, and COVID-19

Viruses and disease are typically not a named insured peril. This means that insurers will often take the position that any closure specifically due to a virus or disease is not covered. 

While this may be true under some policies, there can still be the potential for coverage under a Business Interruption policy depending on the cause of the business interruption – for instance if employees became sick with the coronavirus and thus the business could not operate – as well as the extent of the loss. 

It is also worth noting that some insurers provide specific coverage for viruses, diseases and pandemics.  

If your business has been interrupted or shut down due to the COVID 19 Pandemic and you carry Business Interruption Insurance Coverage you should obtain a copy of the entire insurance policy and then contact an experienced insurance attorney to assess your options.  

At The Callahan Law Firm we have a proven track record of successfully representing policyholders against insurance companies. Call us today at 713-224-9000 to speak with an attorney.