We as an industry have forever have touted the importance of business interruption insurance to protect businesses of every kind. Throughout history, we have seen the actual results of how well this element of a property insurance policy has responded during fires, hail, hurricanes, thefts, tornados and so on. But now with COVID-19 making our empty streets look like something we have only seen in the movies our industry is waking up to the fact that most insurance policies provide no coverage for loss caused by a Virus, Bacteria or Communicable Disease. That means that in these earlier stages of this global downturn, most businesses that need to find a remedy for loss of income are left without an insurance remedy.
A brief explanation of “why”. Why will my business interruption insurance NOT respond when I bought the coverage? Business interruption is a component of a property insurance policy where coverage is only triggered by a covered cause of loss. Thus things such as earthquake, earth movement, flood, inherent vice, loss of market and terrorism are typically not covered causes of loss and specifically excluded under most policies. Some of these, such as earthquake and flood, can be purchased separately or for additional fees. However, what we have found during these difficult times is that the majority of insurance policies written in the domestic US insurance marketplace exclude loss caused by Virus, Bacteria and Communicable Disease. Further, clients want to know why when our government is issuing mandated quarantines or “shelter in place” orders will their same policies that have a civil authority coverage component also not respond. The answer is the same. The civil authority coverage, if present, is only triggered by a covered cause of loss.
So when coverage does not exist we as risk managers and as a society must find remedies elsewhere. Businesses must look to adapt, reduce expenses, or find other sources for help. We are seeing many adapt through remote commerce and changing to new product needs. Reducing expenses can come in many forms but we are seeing many looking to payroll to help with expenses. However, we highly recommend speaking with an employment law attorney before taking steps to reduce payroll and also ask your insurance agent about implications for your Workers Compensation and Employment Practices Insurance. Lastly, as we hear on the news nightly that our government is taking measures to help businesses and individuals through various measures. Take the time to research these measures both at the local, state, and federal level. One such resource is included here for help for small businesses SBA.gov/disaster
Lastly, it is important to stay positive and understand that the most successful individuals and businesses have all faced challenges, failures, and even disasters along their journey but found a way to see through the storm.
Warren Weed
VP Risk Management Solutions
