We’ve seen plants closed, flights canceled and cruise-ship passengers quarantined. So will they respond or not?
That’s insurance-speak for “will they pay or not,” and we’re referring, of course, to insurance companies and whether they’ll pay for business losses resulting from the coronavirus epidemic.
Unfortunately, there’s no clear-cut answer, which suggests that policyholders can expect to face more than a few hurdles if they hope to see any coronavirus-related business losses paid.
Two policies are designed specifically to respond to business losses. One is Business Interruption coverage, which protects businesses from losses that occur on their premises and disrupt their ability to conduct business. The other is Contingent Business Interruption coverage, which helps businesses stay on their feet when disaster befalls a vendor or even a key customer.
The problem is that coverage for epidemics and pandemics might be excluded in Business Interruption and Contingent Business Interruption policies. Moreover, those policies also typically require that any lost profits be caused by physical damage.
That would be a huge hurdle, in fact.
Some court decisions have held that an event that renders a property uninhabitable, or otherwise unfit for use or somehow contaminated, is sufficient to qualify as physical loss. But insurers facing coronavirus-related claims aren’t likely to accept that without a fight.
Business Interruption coverage might be an option if the losses resulted from orders from civil or military authorities, though again physical damage would be a prerequisite. That wouldn’t be much consolation, however, for businesses that have already seen untold millions of dollars in sales evaporate before any government action.
Some BI and CBI policies do offer coverage for disease-related delays, but the virus must be present at the affected facilities rather than at a third-party supplier. In other words, if your supplier in China was shut down by the coronavirus but your operations in the U.S. were not, there’s no coverage.
There’s not much better news on the workers’ compensation front.
Only workers who contract coronavirus on the job and as a result of conditions “peculiar” to their profession can expect their claims to be paid. That would suggest healthcare workers who interact with coronavirus victims and then contract the disease would get coverage. A carpenter, however, would not, because the virus is not something anyone would expect to see on a construction job site.
The bottom line in all this? A number of factors affect whether a loss is covered by insurance, including the nature of the loss and the terms and conditions of specific policies. Standard business insurance policies are designed (and priced) to cover standard risks, not those that are very unlikely, such as the effects of the coronavirus.
Spencer Mahoney is CCIG’s Executive Vice President. Reach him at 720-212-2051 or Spencer.Mahoney@thinkccig.com
CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.
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