While much of the news coverage – and rightfully so – regarding COVID-19 focuses on the health implications, there is considerable concern regarding businesses. As of now, Congress is attempting to pass emergency legislation for a stimulus package, the IRS is granting tax deferments, and banks and lenders are offering interest-free “skip” months for loans and credit cards. Small businesses throughout the south are worried about a shut-down, and their employees are worried about making ends meet.
While there is a lot of uncertainty, there may be a silver lining in the form of business interruption coverage. BI insurance is supposed to cover your losses in the event that your company suffers a loss. As such, you may be able to make a claim for this coverage to help you keep your business running, in even the face of a global pandemic.
Business interruption claims are predicated on incurring “Property Damage” caused by a “Covered Peril” to “Covered Property”
COVID-19 can survive for hours, even days, outside of its host. Data shows that it can live up to three days on plastic and stainless steel. This is why so many agencies are ordering people to disinfect surfaces as often as possible.
Depending on your policy, loss of income or business interruption may be covered. How? Traditionally, property insurance policies provide a specific definition for “property damage.” Without meeting this definition there is no possibility of coverage under a property policy. In most policies, the property damage definition includes “loss of use of property:” it’s easy to understand how a fire or hurricane can damage or destroy property where it cannot be used for its business purposes until repaired or replaced. However, one’s building, contents, machinery, etc. becomes “unusable” when ether a civil authority prevents people from entering the business (to prevent the spread of COVID-19) or people decide to not enter without an order from the authorities for the same reason. So, the property covered by your policy cannot be used, and therefore has incurred “property damage” as defined by the policy.
Next, the property damage must be caused by a “covered peril.” How in the world is COVID-19 considered a “covered peril” or “covered cause of loss”? The short answer on how this may be possible is, most policies cover any cause of loss that is not specifically excluded. These types of policies were first referred to as “all risks” policies versus “named peril” policies, which listed various causes like fire, lightning, wind, hail etc. In recent years, the insurance industry has tried to refer to the all risks policies as “open peril,” instead of all risks policies. Regardless of the nickname, the truth is most policies written now cover all causes of loss not specifically excluded. Depending on the policy and the specific circumstances, COVID-19 could be a covered peril if it caused property damage as defined above.
Lastly, the property damage caused by the covered peril must be to property specifically insured and identified by the policy, such as buildings and or the contents of the building and or equipment, etc., and under the business interruption coverage form in the policy.
The above is a very short and simplified description of necessary requirements to first consider when determining whether a loss of income or business interruption claim may be covered by property insurance.
There are many different forms of business interruption coverage, including one that is incurred by your suppliers of components or the entire product you sell. (It would be impossible to name them all.) There is precedent for coverage: Gregory Packing, Inc. v. Travelers Property Cas. Co. of America. In this case, a federal court sided with the business owner whose properties were deemed unsafe after ammonia was released into the structure, even though it didn’t cause any physical damage.
These are going to be challenging times for business owners, but there could be more help available to you than you think. Warhurst Law is leading the charge to protect policyholders in the United States. Please call 251.207.1296 or fill out our contact form to learn more.