What is Business Interruption Insurance? Comprehensive commercial property insurance policies typically contain a provision giving the business owner some protection for its losses when the business is unable to operate and faces losses due to an external event like power loss, hurricane damage or a fire. This coverage is commonly referred to as business interruption insurance (BI Insurance). Our clients understandably want to know if their package of business insurance addresses their losses sustained because of the Corona virus. Although the answer is probably not, each policy should be reviewed carefully.
Business interruption and related forms of insurance coverage are a potential source of relief from some of the devastating economic losses being caused by the COVID-19 pandemic. Anticipating claims for coverage, some in the insurance industry are asserting that this insurance won’t cover COVID-19 losses because, in their view, there is no property damage, a typical requirement for coverage. Some state legislators have already proposed legislation which effectively rewrites existing insurance contracts by forcing insurers to cover business interruption claims regardless of contrary policy language. A bill has been introduced in Massachusetts Senate requiring every business interruption policy to be construed to cover income losses directly or indirectly resulting from the COVID-19 pandemic, “notwithstanding the terms of such policy.” Similar legislative efforts are under way in New Jersey and Ohio. The insurance industry will surely challenge these legislative efforts. Restaurant owners have already filed suit in state courts in Louisiana and California seeking declaratory judgments that their policies insure them for loss of income caused by both the virus and the orders of civil authorities. Native American tribes in Oklahoma have already filed suit against their insurers seeking declaratory judgments that their policies cover losses incurred due to the forced closure of their casinos. Given the certainty and magnitude of the business interruption losses arising both out of the pandemic and the resulting governmental orders designed to limit the spread of the virus, below are four steps that all who are impacted should undertaking now.