The novel coronavirus or COVID-19 has quickly put many smaller U.S. businesses in jeopardy as the government continues to encourage social distancing and orders more establishments closed to slow the spread of the virus.
As it is with questions and available information about the virus itself, business insurance agencies are fielding many questions from their clients about the applicability of business interruption insurance policies and whether losses due to COVID-19 are covered on existing policies.
Coverage answers on whether COVID-19 borne losses are vague at best and depend on coverages and exclusions within each individual policy.
What Losses Are Covered By Business Interruption Insurance?
Business insurance coverage that includes disruption of business is a vital coverage that protects businesses when something happens that prevents them from actually doing business and bringing in an income such as a fire or storm damage.
That said, there are many exclusions of events that are not covered since these policies typically apply when direct physical damage is done to a building or facility that prevents a business from continuing to operate.
Is COVID-19 A Covered Cause of Loss?
No, although there are a few policies where some losses due to COVID-19 *may* be covered.
Standard business insurance policies with interruption coverage usually specifically exclude losses due to communicable disease and/or contaminants; some also exclude ;loss due to being shut down by civil authority.
There are some policies that may cover such losses if business income was a part of the coverage on a sublimit or limited basis and communicable or quarantinable disease is not an excluded peril.
There are discussions on whether COVID-19 losses could be included under a Contingent Business Interruption (CBI) Coverage, which is a separate policy from the standard business disruption policy offered by most carriers and is not widely available in the market.
How Does Contingent Business Interruption Coverage Work?
Loss of income due to COVID-19 is unlikely to be included in most Business Interruption policies; however, Contingent Business Interruption Coverage may extend coverage if such coverage was written to include communicable disease as a covered loss.
If applicable, coverage that applies in specific cases like COVID-19 could include:
- A company that can no longer do business due to a supply chain breakdown.
- The cost due to contamination from customers and the charges to clean and sanitize the facility.
- A company's losses due to proximity if civil authority closures of a nearby attraction prevent customers from coming in.
Even if there is coverage, the amount covered is limited and the cost is extremely high.
Business Interruption Coverage Varies
Business interruption insurance generally covers when a company can no longer operate due to physical damage to its location or facility and typically excludes losses from communicable or quarantinable disease or contaminant which would include COVID-19.
Even all-inclusive policies that may provide additional coverage usually exclude communicable disease because of prior history events such as the SARS epidemic.
Basically, every business owner dealing with losses due to COVID-19 should speak with their insurance agent to see whether their losses fit any covered categories.
Final Thoughts on COVID-19
It is a new time for everyone and everything with the full effects of COVID-19 yet to be seen.
Please know that the agents at Service Insurance Group are available to help with your insurance coverage.