Coronavirus or Covid-19 Statement to our Commercial Clients
The news on all networks has been filled with information on the now declared pandemic of the Coronavirus. Businesses all over the country are experiencing a dramatic slow-down or outright closure due to government mandate.
Many businesses are questioning if they have coverage for losses related to the closure or slow-down related to COVID-19. For businesses that have Business Interruption Coverage in their policies already, we believe these claims would likely not to be covered for the following reasons:
1) For a business interruption loss to be covered, most property policies require that the loss be caused by “direct physical loss of or damage to property at premises which are described in the Declarations.”
2) Aside from the requirement of direct physical loss, many policies do contain specific exclusions for virus-related losses. These exclusions were developed in 2006, reviewed and approved by state insurance departments and are widely used.
Although these limitations may serve to preclude coverage for COVID-19 related business interruption losses, we encourage clients to file claims with their insurers for several reasons:
1) The insurance company has the burden to prove that there is no coverage under the policy. Insurers are obligated to investigate all relevant facts and circumstances surrounding a claim and evaluate coverage under the policy.
2) There may be government intervention at some future point in time that could require insurers to pay losses that may not, technically, be covered insurance policies.
3) Government funding may be created to assist certain claimants. This idea may or may not gain traction as legislative discussions are in the early stages and it is unknown where it will end up.
Additionally, we think the following will be important in the days, weeks and months to come. We highly suggest that you take every available opportunity to document actions you are taking to prevent and mitigate business interruption loss, steps you are taking to safeguard your operations, staff, and clients. Having detailed and accurate records will likely prove necessary to document a claim you might file. Also, a governmental assistance program is likely to require evidence that you have current insurance and that an insurance claim has been submitted.
Further, we highly recommend that you do not cancel your policy for the following reasons: it’s later deemed your policy will pay for COVID-19 related business interruption claims, cancellation may prevent your ability to receive any support from state or federal programs, or cancellation will prevent you from being defended from any COVID-19 claims against your business for causing a 3rd party sickness or injury.
Please contact our office to discuss this information as details on this subject change from day to day.
The above is not intended to be an exhaustive analysis and is not considered legal advice. Contact your legal counsel or your insurance professional for advice.