Business Interruption Insurance Coverage and what it means regarding COVID-19

We are living in unprecedented times; the Coronavirus is an obstacle that we have never seen the likes of. The impacts of “social distancing”, quarantines, government mandated closing times and 50% capacity caps are still unknown. What we do know is that these disruptions can wreak havoc on a business, we are already beginning to see the short-term effects of this, but the long-term effects are still undetermined. Our goal is to help you make informed and educated decisions moving forward. Now is the time to crack open those insurance policies and see what protections your business may already have. Please keep in mind that the following information is meant as a guide and reference but is not a substitute for consulting with an attorney.

What is business interruption insurance?

Business interruption insurance also known as business income coverage, is just that, it is insurance coverage that can help your business recover after an “interruption.” During a period of temporary suspension or a slowdown in business, this type of coverage can help reimburse revenue lost and pay for operating expenses like rent, payroll, taxes and loan payments.

How do you know if your business has business interruption insurance?

Check your business insurance policy. This type of coverage is not purchased independently, its usually included in property insurance or in a package policy.

What is covered by business interruption insurance?

Business interruption insurance usually covers physical damage or losses caused by natural disasters or devasting events such as fires, hurricanes, floods and windstorms. Most insurance policies even contain language that specifically excludes the threat of contagious diseases. The core of what business interruption insurance may or may not cover is determined by how it relates to an insurance term known as “cause of loss.” Cause of loss literally means, what factors led to the loss of business, these factors can be direct or indirect.  Was this loss in business directly caused by the COVID-19 contamination or did COVID-19 set off a continuous chain of events that lead to a loss or temporary shutdown of your business?

Questions you should be asking.

  • Is the COVID-19 contamination considered a devasting event?
  • Due to the impacts of the Coronavirus, was your business slowed or halted?
  • Did you feel the impacts of government mandated closing times, quarantines, and capacity caps?
  • What caused your business slowdown, did workers stop coming in? Was it difficult to get supplies? We’re you having issues getting in contact with your distributors?

What does all this mean for you?

Overall, there is no guarantee that your business is covered. Even if you do have business interruption insurance, it may not be the answer to your problems. The important thing to keep in mind is that every insurance policy is different, and it is critical to analyze and review the verbiage specific to your policy.