Insurance Coverage for Perils Created by the Coronavirus Pandemic

 

As the coronavirus has quickly spread around the world and throughout the United States, in addition to its human toll it is causing massive disruptions and losses to businesses and all manner of institutions in this country. What began as a concern over supply chain disruptions originating in China has widened into the prospect of air travel, mass transit and whole cities at home and abroad being paralyzed, potentially for weeks or months. With this growing crisis comes a hugely important question: is the economic harm inflicted by the coronavirus covered by insurance? The answer will likely depend upon the specific circumstances surrounding a policyholder’s loss and whether its insurance policies contain specific exclusions for the types of loss being suffered. Policies are not uniform in that regard, so it is important for businesses to read their insurance policies carefully.

Coverage Under First Party Property Policies

A likely source of coverage for financial loss from coronavirus is property insurance. Most businesses have first party property insurance policies which include coverage not only for property damage but also for lost profits resulting from that damage. The coverage for lost income, which is sometimes referred to as “business interruption” coverage, varies from policy to policy, but often covers loss resulting from, among other things, (1) damage to the policyholder’s own property (“business interruption”), (2) damage to the property of a customer or supplier (or a supplier’s supplier) (“contingent business interruption”), (3) government action such as evacuation orders (“order of civil authority”) or (4) damage to properties which attract customers to the policyholder’s business (“leader property”).