Orlando, Fla.— Business interruption insurance is a type of coverage that can be added onto a commercial property insurance policy. It may also be included in a commercial package policy. This type of coverage is not sold separately. Many businesses in the United States, and throughout the world are feeling the effect of the coronavirus (COVID-19) including potential loss of business income due to closings, and additional business disruptions. Certain policies include coverage for “Interruption by Communicable Disease.” Even with this language included, some policies still exclude contamination due to a pathogenic organism, bacteria, virus or disease. Some exclusionary language may not explicitly reference “viruses,” which might actually help with claims associated with physical property damage related to the COVID-19 outbreak. As such, a detailed review of the policy is at the top of priorities right now. After SARS, the insurance industry began to exclude losses incurred by communicable disease in most policies. The only coverage that pays for such losses are specifically pre-negotiated.
The specific rider must be negotiated and accepted at the time the policy goes into effect. Even with communicable disease coverage, many policies limit the amount of recovery to physical costs (cleanup) and exclude loss of revenue inflicted by the outbreak in the policy. Specific pre-negotiated terms that cover customer or supply chain losses would be needed, but there are known to be expensive.
Organizations impacted by coronavirus which carry communicable disease coverage — may still have to wait for an appropriate authority to inspect and certify their facility.
Other Alternatives That Might Help
Commercial Property policies can vary a great deal, but the standard, unendorsed policy would probably not cover losses resulting from a disease outbreak.
Many policies include language and restrictions related to actions of civil and/or military authorities. However, if a civil authority requires you clean or disinfect your property, then the damage to your physical property is more easily supported, which again is required to recover business interruption losses.
A Standard Commercial General Liability policy includes “disease” under its definition of bodily injury. Barring any coverage-altering endorsements (and depending on the state and the specific terms of the policy), it would appear that there is coverage if an insured is found liable for accidentally helping spread a disease; for example, if a music venue did not take adequate precautions to halt the spread of an infectious disease on its premises but, liability policies often include pollution exclusions.
How pollution is defined – and how broadly a court will interpret the scope of the exclusion – will all impact whether liability arising out of a disease outbreak is covered or not.
It is important to note that, a policy may also include exclusions for any liability arising out of communicable diseases.
A Business Interruption Insurance policy can be very important for businesses impacted by disasters, especially ones with major economic shocks. It can be helpful to re-start quickly after the event is over, avoiding losing business to competitors and otherwise maintain operational continuity. Unfortunately, there are many potential disasters that aren’t likely to be covered by business interruption insurance.
A Contingent Business Interruption
This type of coverage could help you get full coverage for business disruption due to a communicable disease, they will need to purchase “contingent business interruption coverage” that specifically includes loss of commerce caused by disease as well as other disasters. It could include loss of revenue due to disruptions from customers, the cost to repair or replace facilities or equipment, and costs to clean and sanitize.
If you own —or may be considering to start a business in the states of Florida, Georgia or Texas, Garzor Insurance offers you insurance options that grow with your business. Compare the offerings from different insurance carriers, and save. Contact us for an initial consultation (321) 206-8035!
Mariana Zorrilla, CIC, CRIS, CPIA
View Mariana Zorrilla, CIC, CRIS, CPIA's Profile