Business interruption insurance claims During COVID-19

In dealing with the financial impact of COVID-19, many businesses are looking to their insurance companies for assistance. Commercial insurance policies can cover certain events that cause temporary interruption in the normal course of business, i.e. a “business interruption” claim. The typical scenario involves physical damage to the premises, preventing a business from operating which results in lost income. The recent protests, some of which resulted in physical damage to businesses, is an example of when business interruption coverage can apply. COVID-19 also prevented businesses from operating. Can businesses expect their insurance companies to indemnify them for lost income during the temporary closure? Insurance companies are, for the most part, denying COVID-19 business interruption claims and the outlook on the viability of the claims remains unclear.

Several class action lawsuits are pending in the U.S. against insurance companies including Chubb Ltd., Travelers, Nationwide, The Hartford and The Cincinnati Insurance Company. The parties seek a court order as to whether their insurance policies include (or exclude) coverage for business interruption due to COVID-19. Insurance companies contend that coverage is not available for COVID-19 related business interruption for a number of reasons including (1) no physical alteration of the premises and (2) exclusions in the policy for losses due to viruses, bacteria, or microorganisms. Businesses contend that coverage exists because (1) the presence of the virus is a physical alteration of the premises, (2) their policies do not have a “virus” exclusion and (3) civil authority coverage applies as a result of the government shutdown of “non-essential” business in many states, among other reasons.

In determining whether to pursue a business interruption claim, businesses should review their policies for any specific exclusions that may apply, including the “virus exclusion” which made its way into many policies following the 2006 SARS pandemic. Businesses should also be mindful of the requirement to demonstrate measurable income loss directly related to COVID-19 and its impact on the physical space of their business. There are also deadlines stated in most policies in which to bring an action against your insurance company to determine coverage and seek indemnity under the policy.

If you require assistance in determining whether you have coverage for business interruption due to COVID-19 or otherwise, please contact the attorneys in our Business and Corporate Services Group.

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