With the event of the COVID-19 or novel coronavirus pandemic, both the U.S. Federal Government and local state governments have mandated that non-essential businesses close their doors in order to slow the spread of the disease. This has put many Americans out of work, disrupted the supply chain, and caused significant damage to the economy. Even though this hurts, it is necessary in order to promote safety and health during this crisis.

However, where does that leave businesses and business owners? Many are left up a creek without a paddle. Many businesses hold business interruption insurance and are filing claims to reduce their losses for varying results. Here we have gathered more information about business interruption insurance for coronavirus and how it might or might not be a solution during this pandemic.

What is Business Interruption Insurance?

Essentially, business interruption insurance is a type of coverage offered by comprehensive business insurance plans or property/casualty policies. These plans cover lost earnings if a business has to close for an extended period of time as a result of natural disasters and other circumstances. 

Some policies may also provide coverage even if a business only has to change operating hours temporarily.

So long as a business has some form of comprehensive, property, or casualty insurance, they should at least have some type of this coverage.

What does BI Insurance Cover?

Business interruption insurance covers the cost of lost profits due to interruptions. It does not cover the cost of damages to the physical property. However, in order for BI insurance to apply, there must be some form of physical damage to the business due to the disaster.

For example, if your business was damaged by an earthquake or a tornado and you need time to rebuild it, BI insurance can cover some of your costs. Flooding and wind damage can also apply, but it will depend on your insurance plan.

The exact date that this coverage starts will depend on policy and the insurance provider. In general, the coverage has a definite start date. For non-essential businesses closed due to government mandate, it’s likely that that date will be the beginning of your coverage.

Is Coronavirus Covered Under Business Interruption Insurance?

The short answer is it depends on your policy. Some businesses have been able to file and receive coverage during the pandemic, but other claims are not being filled despite the business owner having BI coverage.

As you review your coverage plan, look for the keyphrase “cause of loss to trigger coverage.” These will usually refer to what kinds of damage causes insurance payouts. Typically, these triggers include payroll loss, property damage, and civil authority or a shutdown ordered by the government. However, depending on your plan, these triggers may not apply to losses from COVID-19.

In order to know if you can file a successful claim, we recommend that you review your policy in detail. You may want to visit with your insurance agent and specifically look for what triggers your coverage.

A business owner talking with his insurance agent on the phone while reviewing his business insurance policy.
Physical Loss Requirements

Even though many business owners hold business interruption coverage, many of them are being denied coverage. The reason for this is that most business interruption policies require actual physical damage to be done to the property of the business before coverage is triggered.

Therefore, even though the coronavirus is causing business owners to lose money, there is no physical property damage and therefore no coverage. The other problem lies with civil authority clauses. 

In business insurance policies, the civil authority clauses usually refer to disasters or business interruptions that cause physical damage to the business. In addition, because of other epidemics such as SARS in the early 2000s, insurance companies have excluded viruses and other communicable diseases from standard Business Owner Policies.

Specific Exclusion

Another factor that complicates coverage for COVID-19, is that insurance companies have seen mass disease outbreaks before. The most recent epidemics and pandemics include SARS from 2002-2004, Swine Flu (H1N1) 2009-2010, and ongoing Ebola outbreaks. Together, insurance companies usually find ways to exclude covering shutdowns from communicable diseases.

Is there a way to get coverage?

Unfortunately, insurance companies do not have a way to cover costs from coronavirus-related business interruptions. In legal terms, they cannot provide coverage because they never received payment for it.

In New Jersey, there are ongoing legislations that would force insurance companies to retroactively lift policy exclusions for communicable diseases if passed. However, insurance companies have opposed this legislation, because if they were forced to cover every coronavirus related business interruption claim, many of them would probably have to declare bankruptcy.

Some plans may provide businesses with civil authority coverage, but you will need to review your plan to be sure. Once again, make sure that your plan does not require property to be damaged in order for your coverage to trigger.

If your business has already been closed or severely affected by COVID-19, then it may be too late to buy additional insurance. This is because most insurance companies will not sell insurance for pre-existing damages, or they will only pay for damages that occur after the coverage starts.

There is still hope if you need coverage. The United States Government passed a $2 trillion federal stimulus package in order to provide relief for individuals who have lost income due to business interruptions. 

Can I Sue My Insurance Company for Denying Coverage?

The answer to this question, once again is, it depends. Because it seems that most insurance companies are likely to deny any coverage for coronavirus related claims, it is possible that the denial of coverage is wrong.

If you feel that you have a legitimate claim for coverage and were denied, the first thing you should do is review your policy. As we mentioned previously, these phrases will start with some variation of “cause of loss to trigger coverage.”

Currently, there is a group of restaurants in Illinois that are suing their insurance company for denying their damage claims for COVID19-related losses. The grounds of the suit center around defining a coverage trigger clause. One interpretation of the clause in question would not define the presence of COVID-19 on the premises as a physical damage or loss to the business.

The restaurant owners claim that COVID-19 in their premises is enough of a damage or loss and that it should trigger coverage.

What kind of attorney can help me with a BI claim?

If you want to file a lawsuit against your insurer, you should look for a lawyer who has experience in business law and insurance law. The Cochran Firm has a national network of attorneys with experience in many fields. We offer FREE consultations, so please give us a call and we’ll help you determine the best plan to get you the coverage you need.