What are you wearing Jake from State Farm?
Businesses should start reviewing their existing insurance policies to determine whether adequate coverage is afforded for infectious disease-related losses. The scope of coverage will hinge upon the specific terms of each commercial policy but insurance can cover the types of coronavirus losses businesses may soon experience.
Business Insurance
Most small and medium-sized businesses (SMBs) carry some form of business disruption insurance. This includes coverage in the event of a natural disaster or fire. Business disruption insurance is typically not a stand alone policy, but part of an overall comprehensive insurance or property/casualty policy. Business interruption insurance is intended to protect businesses against income losses sustained as a result of disruptions to their operations.
Contingent business interruption coverage affords for financial losses resulting from disruptions to a business's customers or suppliers. Your company may be ready to manufacture, but if vendors or distributors are having issues, third-party CBI coverage could help business keep afloat until things improve.
Business interruption coverage is often triggered when the policyholder sustains "direct physical loss of or damage to" insured property by a covered cause of loss. In terms of a claim for coronavirus-related business interruption, certain insurance carriers may dispute whether this "physical loss" requirement has been met.
U.S. courts have not settled upon a uniform rule for when insured property has suffered a "physical loss." Some courts have determined that contamination and other incidents that render property uninhabitable or otherwise unfit for its intended use constitutes a "physical loss".
Specialized insurance policies, including those sold to hospitality and health care industries, expressly provide insurance coverage for losses caused by "communicable or infectious diseases" without requiring physical damage to insured property.
In addition, some commercial property insurance policies provide coverage for business income losses sustained when a "civil authority" prohibits or impairs access to the policyholder's premises. Accordingly, in the event that a federal, state, or local governmental authority limits access to or from areas where active transmission of an infectious disease has been identified, "civil authority" coverage may respond with insurance for the attendant income losses of affected businesses.
There are also some forms of political risk insurance for business interruption losses suffered by a foreign entity's operations in the host country resulting from local government regulatory actions. Many political risk policies afford coverage for business interruption, even when there is no physical damage to the business.