ABC’s of Business Interruption Insurance

Natural disasters such as hurricanes, tornadoes, and blizzards cause direct physical damage to property. Typically, traditional insurance policies cover natural disasters.  COVID-19 is a different type of natural disaster, one of which insurance policies may not cover.

To file a claim

Generally speaking, a fundamental prerequisite to trigger a Business Income / Business Interruption Insurance claim is there must be direct physical loss or damage to covered property by an insured peril.  In our opinion,  most business interruption insurance policies will probably not respond to Coronavirus (COVID-19).  In addition, many policies contain specific wording excluding “viruses, bacteria or other communicable diseases”.  However,  we recommend business owners be prudent and keep very accurate records. This will document lost revenues and increased expenses related to this incident.  If your business is suffering financial losses due to the COVID-19 outbreak, we strongly recommend keeping a detailed accounting of any such losses. You will then have records in the event there is insurance available to cover them.

Furthermore, while there is no guarantee that something will be done, it is conceivable that as this global situation advances, special government loans or subsidies may emerge in which case this detailed information would become requisite, and therefore critical.  It is likely that insurers will only consider claims associated with policyholders who have accurate, detailed and well-documented records if Federal or State government subsidy programs become available.  This should be part of the steps you are taking as a response to this crisis.

These records are necessary when submitting a claim to an insurance company for a coverage determination. As well as for applying for potential government subsidies that may be made available in the coming weeks. This is also a sound business practice.  For example, just last week, the Small Business Administration announced the Economic Injury Disaster Loan Program.

Economic Injury Disaster Loans

Small Business Administration (SBA) Economic Injury Disaster Loans offer up to $2 million in assistance for a small business affected by COVID-19.  These loans may be used to pay fixed debts, for payroll, accounts payable and other bills. This website will help match you to a local SBA Lender.

This is an evolving crisis and coverage parameters will be tested.  Policies need to be closely reviewed as aspects of each claim will be investigated to determine if coverage applies.  We encourage you to speak with your commercial insurance agent with any questions about your current coverage.