Is your business covered if you have to close for an extended period?

On Wednesday, March 12, 2020, The World Health Organization (WHO) identified COVID – 19 (Coronavirus) as a pandemic.  The virus has now spread to 114 countries, sickened more than 125,000 people and caused at least 4,500 deaths.
As a result; the stock market has seen a 20%+ reduction in value, international travel has been effectively halted, Schools and Universities, restaurants, retail establishments, public venues, gyms and athletic facilities have been directed to close. Business interruption and other losses due to the continued global spread of Coronavirus are projected to total in the billions of dollars. How do you find out if your insurance coverage will reimburse you for the loss of income and extra expenses a result of this?

Business Interruption Insurance 

Typical property insurance policies may provide coverage for a loss of income and the extra expenses related to the spread and community/government response to Coronavirus. These coverages, specifically Business Interruption Insurance, covers a business when their operations are disrupted as a result of a covered loss. In addition, many policies provide coverage for Contingent Business Interruption in the event that a business’s customers or suppliers operations are disrupted, and this causes a loss of income to the business even though their ability to operate is not disrupted.
Most commercial insurance policies that include Business Interruption coverage are triggered by an event that causes direct physical loss of or damage to insured property. An insurance company may not agree that Coronavirus meets the direct physical damage criteria and subsequently may decide that coverage cannot be extended as a result.  
Although courts have not agreed on what constitutes a physical loss, many have found that “contamination” and other incidents that make a property unable to be used for its intended use to be considered a physical loss and allow an insured to collect for a loss of business income as well as the extra expenses associated with that loss. It should be noted that each insurance company and each jurisdiction may look at the circumstances differently and determine an alternative result.
There are policies that include endorsements for communicable diseases that may not include the criteria of physical damage. These policies and endorsements often include other requirements such as; the suspension or shutdown must be ordered by a local, state or federal Board of Health or Government Agency which has jurisdiction over the business operation, the shutdown is as a result of a communicable disease and the illness is present at your particular premises.
Most commercial property insurance policies provide coverage for business income losses that occur as a result of a "Civil Authority" prohibiting access to the Insured’s premises. Many policies do not require that there be direct physical damage to the insured property. In many cases, a declaration that limits access to your property by a federal, state or local government authority could trigger coverage for your loss of income.

It is important to review your coverage with your insurance agent or broker, as well as a professional Public Adjuster to determine whether your policy provides coverage as a result of Civil Authority and Communicable Disease. We are living in uncertain times, but in many cases, businesses can turn to existing property coverage to offset some of the resulting income loss and extra expenses.

Richard S. Cohen, SPPA is an owner of the professional claims consulting firm of Clarke & Cohen, Inc.
www.clarkeandcohen.com