Business Interruption Insurance and Coronavirus: Am I Covered?
We've received lots of questions regarding business interruption insurance and Coronavirus?The economic impact of the novel Coronavirus (COVID-19) pandemic has already been severe and seems likely to get much worse before the outbreak has run its course.Many businesses will lose revenue directly, as customer numbers fall. Others may experience problems with supply chains or be forced to close, either by government mandate or because of staff shortages.Unfortunately, no insurance is designed to compensate for a downturn in earnings, as such, and nor does business interruption insurance typically cover losses arising from public health emergencies.
The Normal Scope of Business Interruption Insurance
Business interruption insurance is generally included in property policies and is designed to cover financial losses consequent upon a business being unable to trade because of physical loss or damage to its premises arising from fire, flood, etc.In the absence of such physical damage, a loss of income arising from government restrictions or changes in customer behavior in response to a pandemic would not usually be recoverable through insurance.
Are Coronavirus Losses Excluded?
Most policies specifically exclude fallout from communicable diseases, such as Coronavirus.This dates back to the time of the SARS (Severe Acute Respiratory Syndrome), bird flu and Zika outbreaks. And it's not totally clear if coverage is extended even when the business’s premises have been fully or partially closed by an order of the government or “civil authority”.Coronavirus would, of course, fall within that definition, and we know that most companies have further protected their positions by making it a specifically named exclusion.
What You Should Do Right Now
So, at the time of writing, it, unfortunately, seems highly unlikely that your business interruption insurance will provide you with any protection against the financial impact of the Coronavirus.But this is a fast-moving and unprecedented situation. It remains unclear, for example, whether state or federal governments will provide any assistance for businesses of the kind that has already been seen in other countries.We should note, however, that you may be able to save money on your insurance during this time. If, for example, your business is experiencing layoffs, you should consider reevaluating your worker's comp insurance, which is typically based on gross payroll. Also, many general liability insurance policies are rated based on gross receipts, so if you're expecting a slowdown in business, it's worth taking another look.
A Disaster Recovery Plan
It’s therefore crucial that you keep detailed records of the ways in which you think the outbreak may have affected your business. Closures in response to a direct government order will be obvious enough. But you should also monitor your customer numbers, daily earnings as compared to the pre-outbreak figures, and, in particular, any restrictions on your operations caused by staff being unable to come to work.For the future, if you haven’t already done so, it may be helpful to consider diseases and epidemics as part of a comprehensive disaster recovery or business continuity plan, which should also, of course, include the best possible business interruption insurance.
Talk to Us
At Brashears, we know that individually tailored, expert advice is the key to achieving this. And our overriding aim is to apply our knowledge and experience towards ensuring that our clients have in place the specific insurances they need. If your have more questions about Business Interruption Insurance and Coronavirus, call us at 805-564-7645 or send us a message here.We look forward to continuing to serve you during this unprecedented time.