While health and safety appropriately remain the top concern with COVID-19, economic impacts such as business interruptions and insurance questions will certainly follow. Businesses should assess their risk of injury and loss, including the recoverability of losses under available insurance coverage.
COVID-19 has already caused many companies to suffer business interruptions and lost profits, especially in industries that cater to large groups and organizations. In all cases it will be important to check policy wordings carefully as coverage for particular losses will depend on the precise terms of the insurance.
Insurance generally covers losses ‘proximately caused’ by an insured peril. In general terms this means that a claim will be covered if the risk insured against is the direct or dominant trigger of the loss. Where COVID-19 falls within the description of insured perils under a policy and the virus is the dominant cause of loss or injury suffered, it may be covered subject to any relevant exclusions or policy conditions.
Business interruption insurance typically requires physical loss or damage to the insured’s property. As always, this is a fact-specific inquiry, and there are not uniform rules for determining when a physical loss has occurred. In many cases, there are at least two types of losses that could potentially trigger coverage. First are losses from contamination, which could occur if your insured property is uninhabitable based upon a positive test. A second type of loss could result from a federal, state or local government not allowing access to your property based upon the size of groups or gatherings. For example, Ohio’s governor has already ordered restrictions on bars, restaurants and fitness facilities, among others.
The key is the involuntary nature of the loss. For example, a covered loss would not likely include a company voluntarily limiting the number of patrons, or customers voluntarily choosing not to purchase the company’s product or service.
Of course, some policies contain a communicable or infectious disease endorsement, which may not require a direct physical loss. This would certainly be the first place to look for a covered loss resulting from COVID-19. Policies may also contain exclusions for epidemics or pandemics which could exclude losses arising from COVID-19. Such policy language may also exclude losses arising from communicable diseases leading to quarantine or restrictions on movement and/or travel advisory or warnings being issued. In such cases the fear or threat of such restrictions will usually also be excluded.
As with any insurance question, coverage will depend on the specific facts and policy language. Please consult a legal professional for a more direct and specific inquiry.
This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Barnes & Thornburg LLP is a large, full-service law firm that seeks to take a more entrepreneurial and cost-effective approach both to client service and its own business.
