Does My Commercial Insurance Policy Cover Losses Stemming from the Coronavirus?

As of March 10, 2020, the CDC says Coronavirus risk is still considered low in the United States, but a significant spread of the disease is likely, even expected. Savvy business owners are concerned about their business and profit over the next few weeks, and questions arise about their insurance coverage for these unusual types of losses.

Insureyourcompany.com is here to help. We’ve put together a blog explaining the CDC’s current expectations as they relate to businesses and special events. Then we’ll talk about the coverages you might have in place to safeguard your earnings. As always, you’re welcome to reach out to us at 888-242-4675 if you have questions beyond the scope of this article and need to speak with a licensed insurance agent.

The CDC Expects Widespread Transmission of Coronavirus in the US

Per the CDC, the widespread transmission of Coronavirus will probably lead to large numbers of people needing medical care all at once. Whether voluntary or government-regulated, quarantines will almost certainly reduce consumer activity.

• Restaurants, retailers, and other B2C businesses will likely experience a dramatic drop in foot traffic.
• Mass gatherings, like festivals or sports events or may be sparsely attended or postponed.
• Hospitals, doctors’ offices and healthcare systems may become overloaded, with elevated rates of hospitalizations and deaths.
• Other business and banking functions will slow, as employees stay home sick or experience localized quarantine.

The CDC notes that other critical infrastructure, like law enforcement, emergency medical services, and the transportation industry may also be significantly affected.

This leads us to the ultimate question of the day: Does Your Commercial Insurance Policy Cover Losses From Coronavirus and Quarantines?

Understanding Basic Loss of Use Coverage

Some commercial policies (not all) provide loss of use coverage, but it may be on a named peril basis. In other words, if your business was to burn down, and it takes a year to rebuild after the fire, you’d likely be covered for loss of use. In that case, your insurance company would pay you for the income you’re losing that year and in many cases it would pay your employees usual wages too.

But is an epidemic or pandemic covered?

Business Interruption & Contingent Business Interruption Coverage

According to this Insurance Journal article “Standard property insurance policies usually include two types of valuable coverage for disruptions like the Coronavirus. Business interruption coverage insures against losses resulting when… operations are directly affected; and contingent business interruption coverage insures against the risk of indirect losses, [like when] suppliers or customers are affected.”

• In other words, you might be covered for these types of losses even if there is no physical damage to covered property like in the fire example we used above.
• In theory, business interruption coverage is triggered when the property suffers a direct physical loss or damage.
• Structural damage to the property may not be a requirement for coverage.
• Proof that contamination – or a similar condition like bacteria, gases, or fumes – rendered an insured property unusable or uninhabitable could be reason enough to file a claim.

Civil Authority Coverage

Some BOPs provide civil authority coverage. It covers losses that occur if authorities restrict access to the area where a business is located, or that the business depends on for its operations. In other words, if your business suffers due to a quarantine, you may be eligible for reimbursement of some or all of your losses.

Looting & Malicious Mischief Coverage

Most commercial insurance policies include malicious mischief coverage. This coverage is meant to cover situations of civil unrest, like rioting, arson and vandalism. Looting is probably covered (though political terrorism or nuclear war are not).

If you have other questions about your business owners policy and your coverages as they relate to Coronavirus, contact us today!

We’d love to help you understand your commercial insurance policy, or provide you with a free quote.