Wisconsin and other states temporarily shut down non-essential businesses to reduce the spread of the COVID-19 virus. These shutdowns will cause devastating economic consequences for many industries and businesses. Many of our clients have asked us whether there might be coverage for business interruption.
Overview of The Insurance Coverage Issues
Many business insurance policies and endorsements cover losses due to business interruption. No one would dispute that businesses have been interrupted by COVID-19. The availability of business interruption insurance depends; however, on whether the interruption to business occurred because of a loss that is covered under the policy.
Typically, business insurance policies provide coverage for losses caused by “physical damage” to the property. The existence of physical damage is like demonstrating where loss is caused by a fire or broken water pipe. It will likely be more difficult to demonstrate that a business suffered a loss due to physical damage caused by COVID-19. This issue will likely be litigated in courts across the country.
Another consideration is whether the policy contains exclusions for losses caused by viruses. Some policies explicitly exclude such losses, whereas others do not. Wisconsin courts have held that some potentially applicable exclusions are “ambiguous” meaning there would be coverage. Thus, you must review your policy before making a claim.
Policyholder Check List
Business interruption coverage cases for COVID-19 claims will be very fact and policy-specific. To evaluate whether there is potential coverage you will need to dig into the fine print:
1. Request a complete copy of your insurance policy. Make sure you ask for a certified copy of your policy including all endorsements.
2. Look at the “granting clause” such as “cause of loss to trigger coverage.”
3. Check whether you have any of the following coverages:
- Business interruption
- Ordinary payroll
- Extended period of indemnity
- Civil authority (note, local government enforcing a “safe at home” policy counts)
- Contingent business interruption
- Contingent extra expense (this reimburses lost profits and expenses resulting from an interruption of business at the premises of a customer or supplier)
- Ingress/Egress (this pays for the loss of income triggered by physical loss or damage caused by a covered peril to third-party property that prevents or hinders ingress to or egress from the insured’s business)
We anticipate that there will be a range of outcomes for business interruption coverage claims related to COVID-19. Coverage will depend on specific facts and policy forms. One certainty is that these questions and issues are only now just beginning.