Will COVID-19 Trigger Protection by Our Business Interruption Insurance Policy? by Attorney Rocky Cabagnot

In earlier COVID-19 legal blogs, we covered Event Cancellation Policies and Force Majeure Clauses.  Click the links to review those blogs.

Do we have Business Interruption Insurance (BII)?

First, you need identify and review all your insurance policies/products that are currently in effect.  You probably won’t have a separate policy for BII.  BII is either added to your property/casualty policy or included in a comprehensive package policy as an add-on or rider.  One shortcut is to ask your insurance broker/agent if you have BII.  Experienced counsel can also review your policies to determine if you have BII in effect for this policy year.

What is Business Interruption Insurance?

Business interruption insurance is insurance coverage that replaces income lost in the event your business is halted for some reason, such as a fire or a natural disaster.  This type of insurance also covers operating expenses, a move to a temporary location if necessary, payroll, taxes, and loan payments.  Business interruption insurance can also apply if government actions cause operations to cease temporarily, which results in a loss for a firm. 

When you find your BII (most standard commercial property policies do include BII), you will need to determine the “cause of loss” trigger.  BII responds when a covered “cause of loss” triggers a slowdown or suspension of operations. 

Is COVID-19 a Covered “Cause of Loss” Trigger?

This is the “million-dollar question” (both figuratively and literally).  Your policy will need to state that communicable diseases (like COVID-19) are characterized as a covered “cause of loss.”  In most BII policies, a covered “cause of loss” is defined to include only direct physical loss or damages like hurricanes, fires, floods, etc.  Most BII policies do not include ‘threat of communicable disease’ as a covered “cause of loss.” Some may not include “communicable disease” as covered “cause of loss.”  Most of these policies are very different from each other.  Many contain different languages and endorsements that alter most standard coverages.

What about Government Actions as a Result of COVID-19 as a “Cause of Loss” Trigger?

If you operate a bar or restaurant in North Carolina, you already know about government actions disrupting your cash flow.   While Government Actions may or may not be a “Cause of Loss” trigger under BII, most traditional insurance policies have separate coverage when a civil order prohibits access to a property or a building.  Arguably, if the Governor says patrons can’t come inside your business because of COVID-19, that’s a government order prohibiting access to your building.

What’s the Bottom Line?

As with everything you’ll hear from a lawyer – it depends.  Every insurance coverage determination is specific to the facts and the policy language.  Whether you seek experienced counsel or not for assistance, you should promptly review all your policies, timely notify carriers of claims, and track losses, even if there are issues or questions that may ultimately preclude coverage.