Insurance coverage relief for COVID-19 business interruption losses
The below information is current as of the publication date listed. Because COVID-19 response measures on all fronts are continually evolving, clients should stay alert to new developments and consult with counsel on any critical questions.
Businesses throughout the country are experiencing potential revenue reduction and business interruptions in connection with the COVID‑19 pandemic. It is important to consider whether insurance coverage will provide some relief and reimbursement for any resulting losses. However, the circumstances in which coverage is provided under policy provisions will be specific to the facts and policy wording. It is important that businesses take steps to review their coverage to assess whether any coverage applies to their circumstances.
What to look for in an existing policy
Business interruption, or business income coverage, is typically found in commercial property insurance policies. These policies often provide coverage that depend upon a particular “cause of loss” that creates a slowdown or suspension of business operations. There are key questions to help determine whether coverage can be provided under the specific circumstances:
- Is COVID‑19 or any contagious disease a covered cause of loss? Many policies contain exclusions regarding contagious diseases.
- Has there been an impact to physical property or systems? If the COVID-19 virus impacted physical property or systems (phones, computers, or buildings) such that the property itself has become the source of contamination, that may be grounds to obtain coverage.
- Has there been a civil order by a government body or agency prohibiting access to a certain property or building based on the current circumstances? Such an order may provide a basis for coverage. It will be important to assess the most current statements by local and state governmental agencies with respect to restrictions on business.
- Is the business interruption being caused by an inability of suppliers to provide materials, labor or data to keep the business operating? If a supply-related shutdown is the cause of the business interruption this may trigger a different cause of loss.
- Does the business have insurance for event cancellation and if so, what are the potential triggers for coverage? These policies may be designed to cover instances where it is legally or physically impossible to hold the event, but not due to voluntary cancellation.
Third-party claims considerations
Businesses should also consider their insurance coverage options if a third party makes a claim against their company. In these circumstances, Commercial General Liability (CGL) insurance policy will likely be the pertinent coverage. Coverage of a third-party claim under a CGL policy may arise because of bodily injury caused by negligence. In the case of alleged improper detention or quarantine against an insured, the policy’s personal injury coverage may apply which is tied to claims such as false detention or imprisonment. As in the analysis with respect to first-party claims, it will be important to determine the precise cause of the alleged breach or business interruption.
When to contact an attorney
It is important to consider current insurance coverage for potential first-party losses and potential third‑party claims arising from the COVID-19 outbreak. An experienced attorney can closely review your specific insurance policy and assess the underlying facts causing the business interruption to help you determine whether it is covered under the policy. If you have made a claim to your insurance company and have received a denial or reservation of rights, consider seeking legal counsel to advocate and litigate coverage matters on your behalf.
Saxton & Stump attorney Matthew W. Rappleye is available to further discuss your business insurance policies and how our Insurance Group can review coverage for possible losses and help you navigate an unwarranted denial or reservation of rights from your insurer.
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