Does my business insurance cover coronavirus/COVID-19 losses?

The State of New York is taking drastic steps to minimize and slow the spread of coronavirus. Businesses of all types have been ordered to close. The financial damage to these businesses is extraordinary. We have been contacted countless times with questions about whether business insurance would provide coverage for loss of business income. There is no simple answer to this question.

Most business insurance policies provide coverage for Business Interruption, Extra Expense and Civil Authority claims. All policies are different, which is why you must review your policy to see if any of these coverages are listed. Even if you have these types of coverage, that does not automatically mean that you are entitled to payment for your loss. Many policies also include endorsements that specifically exclude losses due to viruses or bacteria. Exemption Example (CLICK HERE)

For business interruption coverage to be “triggered”, there must be a covered cause of loss. This usually requires some sort of physical damage or physical loss to the insured property resulting in a suspension of your business and an actual loss of income. One can argue that the physical contamination of property with the coronavirus counts as physical damage. However, most will not have any evidence of actual physical contamination, making this a difficult argument. Even with such evidence, there is a question as to whether this can even be considered physical damage.
Policies with coverage for Civil Authority offer another possible avenue for coverage. Typical policy language reads, “Civil Authority: We will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by the action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.” The problem with this coverage is that the loss must be from a Covered Cause of Loss, which would require physical damage.

Please keep in mind, that even if there is coverage, you as the insured must prove through the analysis of your business books and records that you suffered a loss. Without detailed books and records, business interruption losses are difficult to prove.

We are in the very early stages of this pandemic. Efforts are being made to enact legislation to overcome these issues and force insurance companies to provide coverage for these types of losses.

We all expect these losses to be enormously devastating to affected businesses. We will provide updates as they occur.

If you have any questions, please contact us. We sincerely hope that everyone stays safe and healthy.