UPDATE: COVID-19 and Business Interruption

What is Business Interruption Insurance? Will it respond to lost income caused by COVID-19?

Business interruption insurance, often called business income coverage, is intended to help protect businesses against revenue losses sustained as a result of direct damage to insured property. Damage requires physical harm generally evidenced by changes in the physical characteristics that require repair. ‘VIRUS’ does not meet the definition of causing direct property damage, so in the case of coronavirus, there is no business income coverage. VIRUS is also defined as a ‘pollutant’, which is excluded in most coverage forms.

Due to unprecedented circumstances, is there a chance Business Income would be covered?

While coverage may not apply through current definition, the coronavirus has taken us into uncharted territory. Federal and state governments continue to mandate certain preventive measures. Some states have even introduced new legislation that would mandate insurance companies pay for income related losses due to the closing of an insured’s business. Below are three things that would have to happen for Business Income coverage to potentially respond:

  • Federal or State courts ignore the meaning and reality of property damage.

  • Courts ignore the pollution exclusion (in the absence of the virus/bacteria exclusion).

  • Governmental authorities intervene to provide relief for businesses.

Moral of the story; while currently not defined as a covered loss, the conversation of ‘does coverage apply’ evolves daily and may change due to what’s happening around the world.

What should your business do? Should you file a claim?

As of now, it is too early to determine if coverage will apply pertaining to Business Income losses. However, we would advise you to detail and retain all applicable documentation related to any potential loss. Document the following:

  • Direct and indirect cause(s) of any disruption(s).

  • Mitigation efforts and extra expenses incurred due to the restructuring of operations.

Also, you should be prepared to value and substantiate losses by reference to business history, benchmarks and forecasts. As complex as this may be, this information will be essential at the time of submitting a potential Business Income claim. Furthermore, while we feel it is too early to determine if submitting a claim would be feasible or if coverage would apply, we are more than happy to do so on your behalf. Business Income losses are complicated, but we are here to guide you through them.

Please reach out to us directly for further discussion.

We are grateful to work with you and we’ll get through this difficult time together.

FEE INSURANCE GROUP

Sources: Risk Management Magazine 2020 COVID-19 BI Coverage Chris Boggs – Executive Director of Risk Management and Education – Big I

Jordan Feeill, covid, covid-19, sickness, sick, insurance, close, closure, interruption, urgent, update