My office has been getting many questions about whether insurance coverage is available for business income losses arising from corona virus disruptions. If your business is required to close, or if your tenants or customers are unable to pay you, can you file an insurance claim for loss of income?
In short, property policies are not designed or intended to cover coronavirus claims; property policies typically need some kind of physical damage to property, such as fire, for coverage to apply, and coronavirus losses do not fit into the insurance industry’s traditional concept of “physical damage.”
Most property policies provide an extension for Civil Authority claims, i.e., business income coverage if your business or property is required to close by order of the government. Again, however, Civil Authority coverage also requires a physical damage trigger, such as a wildfire in the neighborhood, or nearby hurricane damage.
Some property policies include some extensions of coverage for cleanup costs arising from communicable disease, but generally these extensions (i) require the “actual, not suspected” presence of disease, and (ii) have low sublimits of coverage. (My office is working individually with our clients to provide specific case-by-case coverage determinations.)
So, anyone with a typical property policy who may believe they are covered for coronavirus business interruption claims doesn’t have realistic expectations.
However, I’m advising my clients to file claims anyway, as changing circumstances may convince, compel, or assist the insurance industry to modify its posture on these claims.
For example, it’s not known at this time whether various states will require insurance companies to pay coronavirus claims, or whether there will be court decisions compelling coverage. It is further possible that the Federal Government will require the insurance industry to cover some these claims as part of the economic recovery. There is also discussion in Congress about a “Pandemic Risk Insurance Act” that would function similarly to the Terrorism Risk Insurance Act that was passed after 9/11.
Bottom line is that this is a rapidly changing, dynamic issue. So, please operate as if you don’t have insurance for this. But, keep careful track of your rent delays and business losses, and work with your tenants, customers, and banks to get through this. We’ll start working with you to organize claims filings, with the hopes that some scenario will play out that enables a claim payment.
I’ve set up a page on our website www.mbdgrp.com/coronavirus as a source for ongoing information about insurance coverage and other issues associated with the pandemic. Please check back to the site regularly for updates and other information.
And, please stay safe, protect your families and your people, and follow CDC and other governmental guidelines to reduce transmission.