Does your business insurance cover Coronavirus (COVID-19) related losses?

Boise has shut down (Photo Cred: KBOI)

Most commercial entities carry a variety of different insurance policies that may help mitigate their financial losses related to the 2019 novel coronavirus disease.

In Idaho, last week’s Stay-home (Shelter-in-place) Order have forced most businesses to close their doors. Retail, restaurants, hospitality, and many white-color businesses now can only do business remotely or offer limited services.

The chart below can help guide Idaho businesses when deciding if their coverage covers loss profits because of COVD019, and whether to file a COVID-19 related claim.

COVERAGE TYPE COVERAGE TRIGGER COVERAGE HURDLES 
Business Interruption Insurance (BI)  Provides coverage for lost profits and related costs when a company can’t continue normal business operations. The business interruption must result from “direct physical loss or damage” to the policyholder’s property. Coverage also depends on the extent and impact of the interruption; for example: did the company experience a slowdown or complete stoppage; and was the interruption necessary or a discretionary business decision?  If the company’s property is closed due to fears of COVID-19, but the property itself remains habitable, then the policyholder likely will not meet the direct physical loss requirement. If, however, the property is contaminated (for example, an infected person has been inside), that may meet the direct physical loss requirement. Many BI policies contain exclusions for property damage arising from:virus (likely applies to COVID-19);communicable disease (likely applies to COVID-19); or bacteria (arguably applies to COVID-19).  
BI Coverage Extension: Civil Authority Provides coverage for loss of business income when an order of civil or military authority impairs access to the company’s business operations. Requires physical loss or damage to property to trigger coverage. A mandatory quarantine order or an order that a business close to prevent the spread of COVID-19, is likely to qualify as an order of civil authority.  No coverage for losses sustained when a business closes due to mere fear of contagion, but not actual physical contamination.No coverage for prophylactic measures taken before actual property damage occurs (even if the order of civil authority is issued to prevent physical damage from contamination). Other conditions that may exclude coverage include:time limitations; and distance restrictions.  
BI Coverage Extension: Ingress & Egress Ingress/Egress extensions cover business interruption losses caused when a company cannot access its own property (other than because of an order of civil authority). Requires physical loss or damage to property to trigger coverage. Actual COVID-19 contamination may trigger coverage (fear of contamination likely does not).  The company’s losses must be casually connected to actual physical loss or damage, which likely includes COVID-19 contamination.Losses sustained when a business cannot be accessed due to mere fear of contagion, but not actual physical contamination, is likely not covered.  
Contingent Business Interruption Insurance (CBI)  Provides coverage for lost profits and related costs caused by business interruptions at the locations of a company’s suppliers or downstream customers.The business interruption must result from “direct physical loss or damage” to the supply chain partner’s property. Some CBI policies require the insured to identify specific supplier and customer locations to be covered by a policy (locations that are not listed are not covered).  If the supply chain partner’s property is closed due to fears of COVID-19, but the property itself remains habitable, then the policyholder won’t meet the direct physical loss requirement. However, if an infected person has been inside of the property and physically contaminated it, that may qualify as physical loss. CBI policies may contain exclusions for property damage arising from:virus or communicable disease (likely to apply COVID-19); or bacteria (arguably apply to COVID-19).  
Commercial Property Insurance Extensions (including specific communicable disease coverage)  Some commercial property policies include endorsements or sub-limited coverages that do not require physical damage to the covered property, but do provide coverage for some COVID-19 losses, such as:business interruption losses caused by illness or communicable disease;crisis management costs;cleanup costs; and cancellation of bookings coverage.  These provisions typically have strict coverage requirements; including, for example:actual presence of the communicable disease at the covered property (not the threat of communicable disease); and waiting periods (for example, requiring that access to the property be limited for more than 48 hours)Entertainment, retail, and hospitality entities are most likely to have these coverages.  

This chart provides general information only. Insurance policies may vary widely in scope and coverage and ultimately the specific language of each policy and unique facts of each claim determines if there is coverage.

Insureds should: Carefully review their policies to determine the extent of any COVID-19 coverage; Expect their insurers to review COVID-19 claims with heightened scrutiny.

For further guidance on your policy, please contact Fisher Hudson Shallat and one of our Boise based attorneys will schedule a phone or video conference with you.