The new coronavirus (COVID-19) has impacted businesses from nearly every sector of the economy. Delays, furloughs, cutbacks, layoffs, shutdowns, etc., have prompted a common question – will insurance cover any losses related to the coronavirus?
Because losses related to COVID-19 come in many forms, this is not an easy question to answer. This is especially true since the terms of many insurance policies vary by insurance carrier, and even the lines of coverage with “standardized” terms often have key terms changed by endorsement that are available only to certain clients or certain industries. As such, there is no hard and fast rule as to whether any particular type of claim will be covered. The only way to know if a policy will cover a claim is to review the terms and conditions of the particular policy with a knowledgeable insurance professional.
- Comprehensive General Liability Insurance (CGL)
- Workers Compensation Insurance (WC)
- Business Interruption Insurance (BI)
- Contingent Business Interruption Insurance (CBI)
- Political Risk Insurance
- Directors and Officers Insurance (D&O)
- Marine Cargo Insurance
Frequently Asked Coronavirus Insurance Related Questions:
1.) Can I get business insurance coverage (such as a business owner’s policy) after a coronavirus-related loss occurs?
No. Just as you can’t purchase collision coverage and expect the insurance company to cover a car accident that already happened, you can’t buy coverage for a pre-existing business loss.
Insurance carriers require you to sign off that you have “no known losses” before they will issue coverage. A claim filed for an event that took place before the policy was in effect (also called “in force”) will be denied.
2.) Does my business income policy protect me while my business is temporarily closed due to COVID-19?
Generally speaking, the answer is no.
Most business income policies require physical damage to the building covered on the policy to qualify for business income benefits. Business income loss from a virus, bacterium, or other microorganism is not usually a “covered peril.”
3.) What does a business income policy normally cover?
Also called business interruption insurance, business income coverage is a standard endorsement that can be added to a business owner’s policy.
Business income is part of a property policy that would cover an insured for loss of income resulting from a “covered loss.” For example, if a business’s office burns to the ground, the company will not be able to generate revenue. Business income would provide a level of reimbursement, which is detailed in the policy itself.
4.) Am I covered if the government forces my business to temporarily close? What if my geographic area is affected by “shelter in place” rules?
Most policies do not cover a “civil authority” (any branch of federal, state, or local government) forcing your business to temporarily close. Unless direct physical damage occurs on your property or adjacent properties, coverage is usually not triggered.
However, disaster relief loans may be available to small businesses affected by mandatory closings due to COVID-19. This is a pending development.
5.) What if I shut down my business as a preventive measure? Will any policy cover this?
Most policies do not cover business losses from a temporary closure of this nature, whether it’s due to a mandate from a civil authority or done as a preventive measure.
6.) Will my policy cover loss of income from reduced foot traffic from the coronavirus?
Business interruption and contingent business interruption insurance will not cover reduced foot traffic. Since the drop in potential customers is not due to a covered peril, these policies won’t compensate for the loss of income.
7.) I had to cancel travel plans and/or purchase new tickets to get my employees home due to coronavirus. Does my policy cover these unexpected travel costs?
Travel cancellation or itinerary changes coverage depends on your specific policy. Most policies do not provide this type of coverage due to coronavirus or any type of communicable disease. Since the extra expense is not related to a covered peril, coverage is unlikely.
Certain special event policies will reimburse for event postponement or loss of deposit coverage. But that coverage would have needed to be in place prior to the coronavirus outbreak.
Liability policies may cover claims involving a suit. They may also help with a claim involving allegations of negligence in exposing third parties to the virus. A virus exclusion is applied to certain classes of business in certain states.
8.) Does my business interruption policy cover losses related to COVID-19?
No, COVID-19 is not listed as a covered cause of loss under a standard business interruption endorsement.
9.) If an employee contracts coronavirus, is my business responsible for related costs? If so, am I able to claim this?
All workers’ compensation claims require an employee to show that the injury or illness arose both (a) out of and (b) in the course of their employment. If they can’t demonstrate this, they will not be compensated.
Because workers’ comp statutes vary quite a bit by state, each situation should be examined on a case-by-case basis. These reviews must consider the statutes of the relevant jurisdiction(s).
We’re here to answer your business insurance coverage questions.
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