On March 11, 2020 the World Health Organization declared the Coronavirus a worldwide pandemic. Within less than 2 weeks, the lives of people all over the world have been impacted in countless ways. In an environment that seems to be changing by the hour, our clients have many questions and concerns as to how the pandemic will affect them as individuals and what it will mean for their families. Beyond the primary concern of health and safety for you and your family, questions arise as to what the pandemic will mean for your business and how you might recover for your losses.
Does my business interruption insurance cover my losses?
Many business owners have questions about their insurance coverages and how they might apply now. An insurance policy is a contract or promise between you and your insurance carrier. In exchange for your premiums, the insurance carrier agrees to provide certain coverage for harm if certain events occur. If you have a fire and your building burns down, they will pay for the damage to the structure. Some policies also provide coverage for business interruption which pays for losses related to the interruption of your business while your building cannot be occupied due to the fire. This coverage is fairly straight forward for a loss such as a fire.
Policy interpretation becomes more difficult when the cause of the loss is not so straight forward. What if a fire to another building on your block causes the street to be shut down and your business can’t operate? What if the harm that keeps you out of the building is exposure from a toxic substance? Or, as we are experiencing now, what if the Governor shuts down your business due to a pandemic?
Your insurance policy describes the types of events that it covers and what events will trigger a business interruption claim. Events that are not listed on, or described in, the policy are typically not covered. However, what is covered and what is not covered is not always obvious. Policy language is often complicated and confusing. It is important to review the policy provisions, exclusions, coverage limits, and applicable deductibles. You should also determine if the policy requires your business interruption to last for a certain time period before you are entitled to any policy benefits.
It is unlikely that your current business interruption policy has contemplated the coronavirus specifically. Your policy should be carefully reviewed for potential arguments that coverage applies. Because coverage varies depending upon how the policy is written, the policy language should be carefully assessed .
Multiple policies may have been structured to provide greater limits or broader coverage than what might have been available from one policy. You should contact your broker or insurer(s) or any related agent to obtain a full explanation of your total coverage.
What if I do not have a policy that says it includes business interruption – could I have coverage under another type of policy?
It is possible to have business interruption coverage under other types of insurance policies. There may be coverage available in policies that cover losses arising out of actions by civil authorities or interruption of your supply chain. Business interruption coverage may also be part of a package of multiple coverages that have been combined or are contained in a Special Multi-Peril or Business Owner’s policy. You may also have coverage under a contingent business interruption insurance policy, which provides coverage for you if interruption to the business or property of another causes your interruption in business.
Insurers typically do not write coverage for known events for which the extent of potential damage is not easily understood, although it is possible to insure specialty risks such as business interruption due to COVID-19 in the Excess Lines market. Because the Excess Lines market is not regulated by the Department of Financial Services, we do not recommend it – there is much less regulatory protection for consumers in that market and the cost may be excessive. You should discuss any potential purchase in the Excess Lines market with your broker or insurance consultant.
Does the Governor’s declaration of a State of Emergency affect my business interruption insurance policy?
Unfortunately, the Governor’s declaration of a State of Emergency does not change the terms of your insurance policy. The language of the policy itself will dictate what coverage you have.
Who can help me understand my business interruption insurance?
An experienced attorney familiar with insurance coverage issues can assist you in evaluating your policy coverages, notifying your carrier of a potential claim and give you advice concerning how to document your losses to support your claim. During this difficult time, the attorneys at Lacy Katzen LLP are ready to assist you in evaluating your situation.