As businesses throughout the United States begin to assess their current losses due to COVID-19, while also trying to plan for the future, many are trying to see where they land with business interruption coverage. Thousands of business interruption lawsuits and claims have been made by businesses looking to find relief in these unprecedented times.
Here’s a better look at business interruption insurance and how it’s being used or sought after by businesses looking to assess their current needs and what they can look to for additional coverage during the coronavirus pandemic.
What is Business Interruption Insurance?
Business insurance compensates for income lost during the time it takes to repair physical damage to covered property and may let the insured recover additional expenses that would not have incurred during typical business operations. This means that coverage is only triggered, in most business insurance policies, by having physical damage to the insured property.
What is Civil Authority Coverage?
So far, the federal government has issued restrictions on several types of businesses when it comes to COVID-19 business interruption coverage. There may be an avenue for businesses to recover losses under the Civil Authority coverage clause inserted in typical business income coverage or Business Owner's policies. However, the Civil Authority coverage clause also contains a property damage requirement on property.
What is Contingent Property Insurance?
Also known as supply chain coverage, this kind of insurance coverage may also be used by businesses to help cover losses due to COVID-19. This will depend on whether the coronavirus will be classified as property damage as these coverages historically require a physical loss to property to provide financial relief.
What About Infectious Disease Coverage?
Businesses may try to recover losses due to COVID-19 through infectious disease coverage. However, it's difficult to predict whether COVID-19 or the threat of potential contamination will be sufficient to access business income coverage. For now, businesses are looking at the state level to see if there will continue to be a gap in coverage and economic loss.
In New Jersey, for example, the state’s legislature is currently considering a bill that would force insurance providers to pay business interruption insurance claims related to COVID-19, even when viruses are specifically excluded from business interruption coverage policies. If it passes, insurance providers may challenge the legality of the rule due to the risk and exposure insurance companies could face from a high level of business interruption claims.
What Are Businesses Doing Now?
In the meantime, businesses are refocusing their operations to tailor themselves to the new normal. For example, restaurants are focusing their efforts on take-out and delivery in most cases until a visible plan is in place to reassure customers of their safety on their premises.
It's important for insurance providers and their clients to keep up with the latest regulations and restrictions to remain compliant. Businesses should also consider whether partial unemployment claims should be filed for employees whose hours were cut.
Lastly, insurers and businesses alike should correspond to what losses the companies are suffering to see what may need to be supplied. If a business interruption insurance claim is made, then both parties will be ready.
For now, the role of business interruption insurance in the world of COVID-19 is a waiting game. It's important for insurance providers to keep the conversation going with clients to ensure everyone is current on the expectations, rules, and regulations surrounding BI claims.
About Axis Insurance
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (877) 787-5258 to speak with one of our professionals.