With the implementation of mitigation strategies to slow the spread of COVID-19, many business owners are almost certain to experience economic losses. In the last two weeks, we’ve received many calls from insureds about coverage for the interruption of their business.
Business Income Coverage can be added to most commercial property insurance policies. It’s intended to address loss of income suffered by a business when damage to its premises causes a slowdown or suspension of its operations. The damage must be caused by a peril that’s covered by the policy such as windstorm or fire, but there could be coverage for shutdowns mandated by ordinances or law as well.
Unfortunately, almost all policies specifically exclude coverage for losses related to viruses, bacteria and communicable diseases. This exclusionary policy language was introduced not long after the SARS pandemic in 2003. Due to the unpredictable nature of emerging diseases, it’s difficult to project the level of risk an insurer would assume were they to provide coverage for losses resulting from infectious diseases.
Though it is highly unlikely that business owners will be able to look to their insurance policies for help with economic losses resulting from the ongoing COVID-19 pandemic, insurers may face legal challenges after denying claims, and the outcome may set the stage for the development of new insurance products to offer some relief for catastrophic losses related to widespread diseases. Or, there may an alternative response, an absolute exclusion for the coronavirus.
For business owners experiencing such hardships who intend to pursue compensation from their insurer or from federal, state or local resources, it’s important to keep track of anything that might affect the settlement of claims or the speed in which they’re processed. Keep detailed documentation of day to day experiences that are impacting normal business operations and income such as workforce fluctuation, supply chain shortages, ordinances or mandates that restrict public access to the business location, etc. Also, be sure to keep detailed records of any expenses incurred as a result of dealing with the circumstances causing the loss.
Businesses face challenges routinely but experiencing a positive outcome for business owners in the aftermath of this crisis will depend on developing alternative approaches to doing business. Communicate with the public through social media and other outlets so they know the status of your operations. Reach out to local, state and federal agencies that may be able to offer guidance and advice. Communicate with your employees about the importance of teamwork during this trying time and most importantly, exercise caution and diligence in observing public health guidelines to minimize the transmission of the virus. Businesses are connected to their communities and will be successful in overcoming this crisis by supporting each other and working together.