What happens if the authorities require my business to close?
Does Business Income insurance respond if a business shuts down because of the coronavirus? What happens if the authorities require the business to close? There is a short answer to these questions, but it's not necessarily a simple answer.
The short- and long-term impact of the coronavirus is anyone’s guess. Never before has the United States experienced such a significant interruption of business – and of everyday life. There are more questions than answers, each of which has potential implications, especially when it comes to insurance coverage. Many policies spell out limits and exclusions but few anticipated this atypical interruption of everything from supply chains to vacations. Even as this is written, creative claims and lawsuits are emerging.
I receive calls and emails every day regarding the insurance implications of this virus, and the most common question relates to business income, specifically:
No, there is generally not business income coverage in this situation. That's the short answer. The longer and more difficult answer is it may all end up being determined by the courts in lawsuits that are most certainly coming, so the truth of the matter is we may not know the answer right now. If coronavrus (COVID-19) causes or results in damage to your business, coverage will depend on the specific facts of the claim and the specific policy’s language. All coverage decisions require an analysis of the claim’s unique facts against the specific terms of the policy, which can only be determined by your insurance carrier. Therefore, it's difficult to advise whether your business should or should not file a claim (the decision is ultimately yours to make, but it probably can't hurt to try).
Before business income responds there must be damage to property leading to the cessation of a business. This requirement applies to business income dependent property losses (supply chain) and civil authority losses covered by business income policies. Additionally, there is a specific property exclusion applicable to viruses that will generally apply. This is true of “standard" business income forms; there may be some proprietary forms that respond, but these are rare.
If it hasn't already done so, your organization should develop and implement a comprehensive Business Continuity Plan (BCP). A BCP is a very important part of your overall risk management and emergency procedures plan and should be one that includes the necessary steps to take in the event of an epidemic/pandemic. And, of course, always follow recommended precautions to keep yourself, your employees, and your visitors safe by staying up-to-date on all City, County, State and Federal notices, in addition to recommended travel restrictions and preventive measures.
Above, I have provided a download link for a white-paper that gives a broad overview of how insurance generally responds to the Coronavirus peril. I'm not an attorney, so if you want legal opinions, you will need to go somewhere else for those; otherwise, the white-paper provides some basic guidance on insurance coverage.
As always, feel free to reach out to Jon Jepsen at SentryWest Insurance Services if you need help or have additional questions.
Disclaimer: This communication is not intended to provide any legal advice or opinion on any individual situation and should not be relied on to determine insurance coverage or lack thereof as relates the Coronavirus. Insurance forms and endorsements vary based on insurance company, changes in edition dates, regulations, court decisions, and state jurisdiction. The information is based on review of insurance coverages, sources we deem to be reliable and communications we have received from insurance companies and other resources. We make no representation or warranty as to the accuracy of information as applied to individual cases. Please advise our office if you want to submit any claim for coverage with your insurance companies.
Jon Jepsen, CIC