COVID-19 and Business Interruption: Some Losses Are Covered and Here’s Why

It has been two months since COVID-19 began to turn the U.S. economy upside down. Suffering massive losses due to the damage caused by coronavirus, businesses have quickly turned to their insurance companies for assistance.

Unfortunately, most have been stonewalled by two party-line arguments from their insurance companies: That COVID-19 does not cause the “damage” needed to trigger coverage and that viruses like COVID-19 are excluded causes of loss anyway.

Fortunately for policyholders, the analysis is rarely so simple. The unprecedented breadth of damage caused by COVID-19 has already spawned unique fact patterns and novel policy interpretation questions.

As the pandemic develops and insurance companies refine their denial arguments, the battle lines will be drawn. At present, however, there are as many questions as there are answers.

Explicit Communicable Disease Coverage? Not So Fast

Some commercial policyholders may be surprised to learn that they have some amount of coverage for communicable disease at insured locations, if the communicable disease leads to a government-mandated closure.

The devil is often in the details with these sublimited coverages, however. Most importantly, many policies require the actual presence of coronavirus at the policyholder’s location in order to trigger coverage.

While straightforward at first glance, this coverage suggests a plethora of potential factual disputes: How can policyholders know whether a microscopic virus is (or was) present at their business, especially when they have been required by the government to shutter the premises? If an infected person passed through the property, is that sufficient to trigger coverage? What if there was coronavirus on surfaces at the insured location, but it has since died off?

These are just a few of the factual questions implicated by the communicable disease coverage tucked into many policies. . . .