With the circulating news, fears, restrictions, and updates on the Coronavirus (COVID-19), we are receiving an increasing number in phone calls relating to coverage for business interruption caused by the pandemic. As always, coverage is determined by the specific language found in your policy, as well as the specific circumstances of the loss.
So, you may be asking – what is business interruption insurance?
Business interruption insurance is a coverage that replaces income secondary to a disruption in business from a covered peril (such as a fire or natural disaster). This coverage is not sold as its own policy but is either added to a property and casualty policy or comes included in a comprehensive package policy as an add-on. Typically, the following things must occur for it to be considered a claim under business interruption insurance: physical damage to the insured property, caused by a covered peril, which results in a measurable economic loss (or business interruption) while the restoration of the damaged property is being completed.
The keywords in the above definition are “physical damage”. With business interruption coverage, physical damage to the insured property is the common event that will trigger the coverage – having business interruption without this trigger is likely not enough to bring this policy into effect. Furthermore, viruses and diseases are not typically considered an insured peril (hazard), unless added by a special endorsement. To be considered a business interruption loss, the claim must be caused by a covered peril as noted on your policy.
Standard business interruption policies often have an endorsement that excludes infectious diseases, viruses and/or epidemics. Although, in rare occurrences, specialty insurance has been developed in response to epidemics. As an example, in October of 2014, specialty brokers joined forces with the Ark Specialty Program of Lloyd’s of London and released a type of coverage called “Pandemic Disease Business Interruption Insurance” in response to the Ebola crisis. This special program covered loss of income arising from government-mandated closure of healthcare facilities and diminished revenue in the aftermath of quarantine due to the Ebola pandemic.
According to www.propertycasualty360.com, the insurance industry is in the process of working on a response to the COVID-19 outbreak. Last month, the Insurance Services Office, or ISO, created two new endorsement forms, “Business Interruption: Limited Coverage for Certain Civil Authority Orders Relating to Coronavirus”, and “Business Interruption: Limited Coverage for Certain Civil Authority Orders Relating to Coronavirus (Including Orders Restricting Some Modes of Public Transportation).” These forms will offer coverage for actual loss of business income, as well as extra expenses, that are secondary to a government order closing the insured’s premises or quarantining all or part of the properties, and from government-ordered interruption of some public transportation. While these endorsements may seem like there may be light at the end of the tunnel, they have not yet been filed with any states and are therefore not an option for use at this time.
As a result, there is no definitive option at this time that will provide business interruption coverage due to the COVID-19 outbreak; but that does not mean the insurance industry is not working on a resolution. We are keeping in close contact with our partner carriers and will continue to update our clients if any breakthrough news occurs.
In the meantime, please do not hesitate to call us with any concerns regarding your coverage and policies; we will do our best to work with you and your carrier to answer any questions you may have.