CORONAVIRUS and BUSINESS INTERRUPTION
It is with some dismay that I provide this information. The Coronavirus has affected people all over the world, and offers a set of difficulties and challenges that have never been seen before.
We have, naturally, received numerous inquiries regarding the Coronavirus. While there are issues yet to be resolved as regards General Liability and Workers’ Compensation insurance, the most common question is “are we covered for loss of income if our sales fall off (or our tenants don’t pay their rent) (or if we are required to close by a government authority).
I cannot speak for every insurance company, but for the vast majority of them who use the accepted standard industry forms, and who enforce them, it is unlikely that any coverage will be afforded.
The specific reason is that Business Interruption is a “Property” coverage and, in order for coverage to be triggered, there has to be physical damage as a result of a covered peril to business property. Disregarding the question of “what is a covered peril”, the primary obstacle is that, where the Coronavirus is involved, there is no damage to property, and the requirement to trigger coverage is therefore absent.
There is also, generally, limited coverage under an extension for “Civil Authority”, whereby a business suffers a loss of income as a result of an order to close, given by a recognized civil authority. However, again, the coverage is triggered by some form of property damage from a covered peril. For example, if a business is forced to close because of a fire in an office building across the street, there is no damage to your property, but the property damage to the non-owned property resulted in a loss of income. In the case of the Coronavirus, action taken by a civil authority is not the result of property damage and therefore the policy is not designed to respond.
It is my sincere hope that the situation we all face is short-lived. Our advice is that you, and everyone, follow the precautionary protocols that have been established by the medical community, the CDC and other government authorities.
CEO & Co-Owner
Prince-Wood Insurance Agency