Urgent Update

COVID-19 Community Update

By
Daniel Kuzbiel
on
April 1, 2020

As the COVID-19 virus spreads around the world and more closures are announced each day, business owners face unprecedented losses due to business interruption and disruption of supply-chain.

As the COVID-19 virus spreads around the world and more closures are announced each day, business owners face unprecedented losses due to business interruption and disruption of supply-chain. While many of them have business insurance policies that include business interruption and loss of revenue in an event a disaster strikes, the majority of the policies exclude compensation for communicable disease outbreaks and will not provide coverage for the current pandemic. 


Business interruption is typically covered under a business property policy which pays for lost revenue when a business operation is unexpectedly interrupted - for example, as a result of fire or flood. However, after the insurance industry was hit with large claims following other viral epidemics (SARS in 2003 or Zika in 2015), the majority of insurance companies significantly restricted business interruption coverage, by using “direct physical loss or damage” (like fire or flood) as a requirement to get payment. This means that coverage is afforded only if there is quantifiable physical loss.


In addition, most insurers specifically exclude losses resulting from communicable diseases like COVID-19. Those that do offer coverage (which typically must be added as a rider when the policy is purchased) limit the amount of recovery to physical cost like cleanup and sanitization of facilities and exclude loss of revenue. 


As a global pandemic, COVID-19 is certainly changing the way we approach business and will force business owners to reassess their future risks and policies. While most companies now exclude coverage for COVID-19 like diseases, new carriers focused on underwriting this kind of risk are bound to emerge to offer protection for business owners in the future.