Does Business Interruption Insurance Cover Losses From The Coronavirus?
Does Business Interruption Insurance Cover COVID-19 Coronavirus? Coronavirus, or COVID-19, has put the world at a stand-still. In an effort to contain the virus, prevent overwhelming medical facilities, and stop the loss of life, many restrictions have been set in place.
Restaurants, retailers, sports leagues, special events, amusement parks, movie theaters, barbershops, salons, and various other non-essential businesses are being ordered to shutter their doors. If your business has been affected as a result of the pandemic, there's no doubt that you are going to experience serious financial distress.
Many commercial property policies include business interruption coverage, That pays for lost income, continuing and extra expenses incurred from a covered loss. So does business interruption insurance cover COVID-19 Coronavirus?
What is business interruption insurance? What does it cover? How can it protect business owners who are affected by the current COVID-19 pandemic? Read on to find out the answers to these questions and more.
Does business interruption insurance cover COVID-19 Coronavirus? Business interruption coverage, which pays out lost income resulting from a covered loss - probably does not extend to disease outbreaks.
You can skip to the following answers to the how much does general liability insurance cost and business liability insurance cost questions - using these links:
- Does Business Interruption Insurance Cover COVID-19 Coronavirus?
- What Does Business Interruption Insurance Cover?
- What Does The The Exclusion Of Loss Due To Virus Or Bacteria Mean?
- Does My General Liability Policy Cover Business Losses From COVID-19 Coronavirus?
Does Business Interruption Insurance Cover COVID-19 Coronavirus?
If you have a commercial property insurance policy that includes business income coverage - read through your policy to see if it has this exclusion. If it does - chances are you won't have any coverage for income losses and expenses resulting from Coronavirus.
If you have a non-standard commercial property policy with business income that does not have the CP 01 40 07 06 | EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA, call your insurance company to start the claims process - if your business is closed to to the COVID-19 pandemic.
There may be some issues when it comes to obtaining coverage through a business interruption insurance policy and the COVID-19 pandemic. As stated above, a standard business interruption policy covers "direct physical losses", which excludes financial losses that are not related to a specific loss of the physical use of a property that can be demonstrated.
Furthermore, after the previous SARS pandemic that occurred during the early part of the 21st century, many insurance companies started o exclude provisions for contagious bacterial and viral outbreaks. See below for more detailed info on this exclusion.
What Does Business Interruption Insurance Cover?
While the coverage that a business interruption insurance policy offers varies, generally, this type of policy covers loss of income as a result of an unforeseen circumstance.
For example, if your business is forced to close because a fire broke out in your facility or if you are unable to attain products you need because a supplier was affected by a natural disaster which results in loss of income for your business, this type of policy would help to cover your losses.
A standard business interruption insurance policy states that it will pay for actual losses of business income that are sustained as a result of the necessary suspension of business operations during a "restoration” period". This suspension must be the result of a direct physical loss or damaged or destroyed property.
In other words, the loss or damage has to be the result of or caused by a loss that the policy covers. Does business interruption insurance cover COVID-19 Coronavirus? Keep reading to find out.
What Does The The Exclusion Of Loss Due To Virus Or Bacteria Mean?
In 2006, a few years after the SARS-associated coronavirus (SARS-CoV) outbreak in 2003 - which cost insurers billions in losses - the Insurance Services Office (ISO) added form CP 01 40 07 06 | EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA to most commercial property policies (most insurers use standard ISO policy forms) and it states (highlighting is ours):
A. The exclusion set forth in Paragraph B. applies to all coverage under all forms and endorsements that comprise this Coverage Part or Policy, including but not limited to forms or endorsements that cover property damage to buildings or personal property and forms or endorsements that cover business income, extra expense or action of civil authority.
B. We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. However, this exclusion does not apply to loss or damage caused by or resulting from "fungus", wet rot or dry rot. Such loss or damage is addressed in a separate exclusion in this Coverage Part or Policy.
C. With respect to any loss or damage subject to the exclusion in Paragraph B., such exclusion supersedes any exclusion relating to "pollutants".
D. The following provisions in this Coverage Part or Policy are hereby amended to remove reference to bacteria:
- Exclusion of "Fungus", Wet Rot, Dry Rot And Bacteria; and
- Additional Coverage – Limited Coverage for "Fungus", Wet Rot, Dry Rot And Bacteria, including any endorsement increasing the scope or amount of coverage.
E. The terms of the exclusion in Paragraph B., or the inapplicability of this exclusion to a particular loss, do not serve to create coverage for any loss that would otherwise be excluded under this Coverage Part or Policy.
Below is an image of the actual CP 01 40 07 06 | EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA form a commercial property insurance policy:
Download a copy of the actual exlusion form here: CP 01 40 07 06 | EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA
Does My General Liability Policy Cover Business Losses From COVID-19 Coronavirus?
Your general liability insurance policy protects your company from third-party claims bodily injury, (slips-and-falls), third-party property damage, (your business damages other people's property), and other third-party damages.
Because the Coronavirus pandemic was not caused by your company, it is not covered by the bodily injury, property damage, or other coverages. This means that your general liability policy most likely will not cover losses from COVID-19.
Does Business Interruption Insurance Cover COVID-19 Coronavirus? - The Bottom Line
During the current COVID-19 Coronavirus pandemic, businesses across the globe are suffering financial losses. Not all business interruption insurance policies will exclude coverage for the losses that are related to the coronavirus outbreak. Your policy may offer provisions for viral and bacterial outbreaks, so it's a good idea to review the terms and conditions of your specific policy.
Moreover, financial losses that are related to the COVID-19 pandemic depends on whether or not your policy offers business interruption coverage as a basic term, or if it provides this coverage as an endorsement. It's important to note that endorsements usually offer broader coverage than basic policies, as endorsements require additional premium payments.
So does business interruption insurance cover COVID-19 Coronavirus? Some current industry opinions are saying that if you can provide proof that Coronavirus was found on the physical premises of your commercial property, it may be possible to state that you have suffered a "direct physical loss" to your property, in which case, your policy would cover your losses. Again, it depends on what your specific business interruption policy classifies as a "covered peril".
Speak to your insurance agent or to your insurance company's claims department to find out more about the specifics of your policy and whether or not businesses losses caused by COVID-19 are covered.
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Get useful tips and information about how much commercial insurance costs, small business risks and exposures, how insurance regulations effect your businesses' and detailed descriptions of coverages and exclusions and more. Most small businesses need to buy the following four types of insurance at a minimum to cover their operations from every day risks:
Property Insurance: This policy covers a business if the property used in the business is damaged or stolen as the result of common perils like fire or theft. Commercial property insurance covers the buildings, structures and also business personal property - which includes furniture, inventory, raw materials, machinery, computers and other items.
Liability Insurance: Any company can be sued. Slip-and fall lawsuits are very common and be costly. Customers can claim you injured them or damaged their property - and lawsuits are very expensive. Commercial liability insurance pays damages and can include attorney's fees and other legal expenses. It also ca pay for the medical bills of injured third parties
Commercial Auto Insurance: For vehicles owned by the business. Commercial auto insurance pays bodily injury or property damage costs for which the business is found liable - up the the policy limits for liability and property damage.
Workers Compensation Insurance: In almost every state employers must provide workers comp when there are W2 employees. Workers compensation pays for the medical care of employees and can replace a portion of lost wages - regardless of who was at fault for the injuries.