By: Reynolds Renshaw
The COVID-19 pandemic has resulted in business closures from government order and low demand. Business owners have furloughed and laid-off staff and are scrambling to pay bills. While the federal government and other sources are planning small business loans, they have yet to be finalized and in some cases are struggling to formalize distribution mechanisms. Many businesses purchased Business Interruption (BII) coverage as part of their commercial property insurance and believe this should respond. Unfortunately, insurance providers disagree. Insurers are taking the position:
- Any claim for BII must be the result of a property damage from a covered incident (example kitchen fire and resulting forced closure),
- Property insurance does not contemplate pandemic coverage – although many have virus or communicable disease exclusions. The policies do not consider and do not include premiums for pandemic coverage.
Claim denials have recently sparked a backlash against the insurance industry. Three states (Massachusetts, New Jersey, Ohio) have introduced legislation to retroactively remove virus exclusions to force the policies to respond. Policy holders are filing suit against the insurance companies. They claim businesses were shut down by government mandate and that the presence of a dangerous substance (virus) is property damage. Further, some cases state there was no virus exclusion in the policies.
This issue is far from over and EHS Support will continue to follow the developments. If your business has a commercial property policy with business interruption coverage, we recommend that you document your situation, review the policy, and contact your insurance broker.