Business Interruption Insurance Alert

Virtually every company in New York State has been impacted by the COVID-19 outbreak. Many of these companies have business interruption insurance (also known as business income insurance), which is typically found as part of the insured’s property and casualty commercial insurance policy. However, the coverage scope of each policy can vary in certain critical ways and can have numerous wrinkles, any of which may expand, limit, or exclude potential coverage for a company’s loss of business relating to COVID-19.

You may have “business interruption” coverage if you can establish (1) a suspension or reduction of operations, (2) caused by physical loss or physical damage, and (3) resulting from a “covered cause of loss” or “peril”. Whether a virus such as COVID-19 is a “covered cause of loss” (or “peril”) that causes or results in property damage is undecided (but is already the subject of at least one lawsuit in Illinois). However, certain facts may make coverage more, or less, likely.

Some insurance policies may contain “civil authority” provisions, which will come into play if the insured can demonstrate that (1) an order of a civil authority was issued (i.e., Governor Cuomo’s Executive Orders), (2) the order prohibits access to the covered business, and (3) there was a covered cause of loss to property in the immediate area of the covered business(i.e., another nearby business suffered damages from infected COVID-19 employees).

Policies may also have explicit exclusions based on viruses, epidemics, pandemics, communicable disease or the like, as well as potentially explicit inclusions or endorsements that expressly provide coverage for, among other things, viruses.
The most important, and first step, is to review your insurance contract with your broker and your counsel.