Coverage for Covid-related Losses

As people everywhere struggle with the financial impact of the Coronavirus crisis on their businesses, policyholders are wondering if their property insurance policies can help.

While insurance carriers are working overtime to deny coverage for these types of losses, as Attorney Sharon O’Malley put it: “If history is any guide, policyholders and their Public Adjuster and/or attorney will attempt to advance creative arguments for coverage in response to the Coronavirus. The key to responding properly is a careful analysis of the specific policy terms and conditions at issue, informed by experience and relevant legal authority.”

So let’s look a little deeper...can the steps taken to minimize exposure to Coronavirus or to reduce its spread trigger insurance coverage?

The answer is YES.

In fact, steps taken to minimize exposure to the Coronavirus or to reduce its spread may trigger insurance coverage under multiple types of insurance policies.

The analysis of a typical Business Interruption claim generally starts by asking the following question: (1) Did a covered peril (2) cause direct physical damage or physical loss (3) to insured property or property at the described location or within a specified distance (4) during the policy period (5) resulting in an actual loss of business income (6) due to the necessary suspension of the insured's operations? It’s a complicated question that we’ll break down.

Do we have a covered peril?

Most business owners insurance policies are going to be issued on what’s considered an “Open perils” basis. Meaning, all losses are covered unless the policy specifically excludes or limits coverage for that specified event or circumstance.

Did the covered peril cause direct physical damage?

While the law is not settled on what constitutes a “direct physical damage”, legal cases have been successfully tried throughout the country that hold contamination and other incidents that render property uninhabitable or unfit for their intended use are sufficient.

Was the damage sustained to insured property or property at the described location or within a specified distance?

Many property policies extend business interruption coverage not just for the insured property but also for losses arising from “civil authority” orders that impair or prohibit access to an insured’s property.

Did the damage occur during the policy period?

If your insurance policy was effective as of March 11th 2020, then the damage occurred in the policy period.

Did the damage result in an actual loss of business income?

Business income loss generally must be incurred to qualify for insurance coverage. Meaning, assumed or projected losses are not typically paid through insurance proceeds, but once income has been lost, it can be claimed.

Was that loss of income due to the necessary suspension of the insured's operations?

Any income loss due to any other reason than the direct impact of a covered peril is not covered.

So…insurance coverage for complex claims like those related to Coronavirus and its impacts should be considered in consultation with a claims advocate who has experience analyzing and interpreting insurance policies. By doing so, policyholders may discover that they have financial protection for their loss.

f you have any questions regarding coverage interpretation or current legal developments related to Coronavirus (SARS-CoV-2), please do not hesitate to contact Eastern Public, LLC at (929) 999.4674 or info@EasternPublic.com.