Insurance Coverage for Business Interruption
Whether you are running a large corporation with hundreds of employees or a small, local company with part-time or seasonal workers, almost every business will experience some detrimental impact from this global pandemic. When starting your business, you may have even discussed such a scenario with your attorney or, more likely, your insurance agent. Though perhaps not this particular situation, your agent may have given you hypothetical scenarios in which your business would be interrupted, such as fires, windstorms or even theft. Given these scenarios, none of which seemed too far-fetched at the time, your agent may have convinced you to purchase business interruption insurance{1}. Such coverage would have been added to your commercial property policy, business owner’s policy or, if you chose to customize your coverage, some other commercial package policy{2}.
Business interruption insurance can be used to cover certain costs and expenses when your business is shut or slowed down due to a damaging event. Such costs and expenses include, but are not limited to, lost revenue, rent, utility expenses and even marketing expenses to advertise a new or temporary work location. This sounds great, right? Not so fast. As with most contractual agreements, the devil is in the details. This cannot be truer when dealing with our current situation.
You may have recently received a notice from your insurance carrier or perhaps saw an article with a sweeping, generalized statement that the novel coronavirus (COVID-19) is not a covered event under your policy. For some, this may be true; however, contrary to what you may have recently read or heard, one size certainly does not fit all. To determine whether the novel coronavirus (COVID-19) is a covered event, each business must look to their own policy. After all, an insurance policy is nothing more than a contract, which should be somewhat unique to the parties{3}. For instance, though perhaps some resemblance may occur, a business owner’s policy for a small, local restaurant would not, and should not, mirror the business owner’s policy for a large manufacturer with multiple facilities. Similarly, two businesses of equal type and size may see significant differences across their policies if those policies were purchased from different providers.
If you are thinking of making an insurance claim, you should first look to the list of excluded events provided in your policy. Following previous viral outbreaks like SARS-CoV (Severe Acute Respiratory Syndrome), many carriers started excluding viral and pandemic diseases as covered events. If your policy contains such an exclusion, the language of that exclusion should be carefully scrutinized. After determining whether your policy contains this exclusion, and to what extent the exclusion applies, you must next determine how your policy defines a covered loss. Unfortunately, this language may not be as clear or easy to interpret as the policy’s list of exclusions. For many, however, their policies will require a physical loss. Generally speaking, whether and how that term is defined by your policy will largely control the coverage provided.
At this time, it is not surprising to see that many carriers have issued statements sweepingly disclaiming coverage. In the past, such announcements have proven to successfully reduce claims and, in turn, limit carrier losses. Considering this motive, do not feel discouraged or dissuaded. To preserve your rights, we would first recommend that you promptly file a claim with your carrier. In the event your claim is denied, for any number of reasons, our team is prepared to review your policy and, if appropriate, contest any denial you may have received. If you would like more information or would like to discuss your policy, please contact a member of our team at 716-636-7600.
{1} – Business interruption insurance is also referred to as business income insurance.
{2}- Such coverage is not marketed or sold as a stand-alone policy.
{3} – With varying types and sizes, even the same types of insurance policies (i.e., business owner’s policy) may differ from business to business.
DISCLAIMER: This article has been published as a service to the general public and, as such, is intended for general purposes only. The information contained within this article should not be considered or construed as legal advice. Each reader is advised to consult legal counsel to determine how the contents of this article may apply to their particular facts and circumstances.
For changing and up-to-date legal information, visit our COVID-19 Resource Center.