Business Insurance: What It Covers During a Pandemic
The insurance sector has been impacted by the COVID-19 pandemic of 2020, commonly known as Coronavirus pandemic. The insurance industry remains strong and has a unique role to play in providing protection to consumers and businesses impacted by the pandemic. Several types of insurance have provisions and exclusions that may be triggered as a result of COVID-19. Below are answers to common questions about COVID-19 and the potential impact.
Will my business disruption insurance cover me during a shutdown?
Unfortunately, it’s unlikely that you will find coverage through your business disruption coverage. Generally, the triggering event for coverage would include physical damage; a pandemic is not considered physical damage. Also, under business disruption coverage there can be Civil Authority coverage, this too generally is triggered by physical damage.
Standard policies also usually contain an exclusion for viral pandemics or pandemics. These exclusions arose in or around 2003, during the SARs outbreak and are traditionally maintained in the standard language of commercial insurance. Keep in mind that policies can differ greatly, so it’s always important to talk with your licensed insurance agent to clarify exactly what is or is not included in your coverage.
- Business interruption insurance coverage protects against losses sustained due to periods of suspended operations; it pays loss of revenue that would have been earned if there was no business interruption. It typically provides coverage only if a physical loss to property occurs and may have specific exclusions for viral infections such as COVID-19.
- Contingent business interruption insurance policies protect against losses from supply chain disruptions but may require the occurrence of property damage to trigger coverage.
- Event cancellation insurance provides coverage for expenses arising from delays, rescheduling or cancellations due to unforeseen covered events. Typically, contingent business interruption and event cancellation insurance policies exclude coverage for communicable diseases, such as COVID-19.
Does my commercial policy cover COVID-19 for my business?
It is very important to review the provisions in your business polices, particularly business income policies. Here are some things to look for in your policy:
- Business income polices reimburse an owner due to loss of income due to a suspension of operations.
- Common Policy Verbiage: We will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration”. The “suspension” must be caused by direct physical loss of or damage to property at premises which are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations.
You should contact your agent to review your policy and ask additional questions. You can also contact CMR & Associates for help.
If a government authority makes me close my business, does the “Civil Authority” additional coverage trigger coverage?
While a loss does not need to occur to your business for Civil Authority additional coverage to be triggered, a loss does need to occur to another business for there to be coverage. It is recommended that you review your policy with your agent.
What about contingent business income?
Contingent business income provides coverage when a supplier has suffered a loss, therefore forcing your business to not be able to function. The trigger for contingent business income would be a loss to the supplier’s property.
What is the definition of a loss?
Most policies contain similar definitions to those listed below, but you should review your specific policy for accurate definitions.
Losses are broken down under three main coverages:
- Basic – named perils needs to be listed in the policy.
- Broad – named perils needs to be listed in the policy.
- Special – covers any loss not excluded in the policy, must be direct physical loss.
Example of a named peril:
Infectious Diseases – this includes loss caused by the complete interruption of your operations by an infectious disease acquired by your employees or staff.
Example of an exclusion:
Virus or Bacteria – any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.
Common Policy Verbiage: When Special is shown in the Declarations, Covered Causes of Loss means direct physical loss unless the loss is excluded or limited in this policy.
Please contact CMR & Associates for assistance in understanding and improving your business insurance coverage.
About CMR & Associates + PolicySmart™
CMR & Associates’ Risk Management Consultants provide independent insurance and retirement advice by reviewing your current plans to improve coverage and reduce cost. Through CMR’s proprietary database – The CMR Database® (comprised of some 13,000 brokers and specialists globally) – we maximize access to the insurance and retirement industry for greater options that will translate to better coverage and lower cost.
Please email CMR Associates or call 877-447-4301 or 212-447-4300 for more information.