Is there insurance coverage for your business operation due to the COVID-19 pandemic?
Many of our clients have a business insurance package that includes business interruption coverage. As to whether your company’s policy will provide coverage for loss of profits will be dependent on the language of your policy. Accordingly, it is important to review your insurance policies, which might require you to notify your insurer within certain time limits prescribed within the policy and to determine whether there are other obligations that you must adhere to in order to perfect coverage, to the extent that coverage is available to you.
In our experience, most property insurance policies containing a business interruption provision require that the interruption result from a “direct physical loss or damage” to the insured’s property. Additionally, there may be a provision that affords business interruption coverage where a key supplier has suffered a direct physical loss to their property. In other instances, the policy may include “civil authority” coverage, which could cover losses arising from civil authority orders that would impair an insured’s operations.
If your policy requires direct physical loss or damage to property, there may be no coverage for COVID-19 losses, even under the “civil authority” coverage provisions.
We anticipate that there will be an extraordinary number of challenges to coverage denials when businesses are forced to close because of the contamination of their premises. We are aware of at least one suit that has already been filed in the Civil District Court for the Parish of New Orleans, Louisiana, where the insured is contending that the contamination of the premises caused by the virus is a direct physical loss. We will be monitoring this matter closely for our clients.
Many commercial insurers adopted exclusions for infectious diseases, including flu outbreaks and epidemics. You should review your business insurance program for such exclusions, which could preclude coverage
If you have business interruption coverage and a review of your policy leads to uncertainty as to whether your policy will afford coverage for loss of profits resulting from COVID-19, our firm’s coverage team would be pleased to have the opportunity to assist you in the assessment for coverage.
Please feel free to reach out to us to discuss any concerns that you might have: