COVID-19 and Business Interruption Insurance

These are crazy times. Social distancing. Isolation. Businesses closing to the public.  Scrambling to find a way to stay relevant and not just disappear.

We closed our doors to the public last Friday – only 4 working days ago. And in that time, we’ve completely shifted to a work from home office model. Not every business has that luxury.

Many businesses that we work with are having to let workers go or close their doors indefinitely. Many businesses contact us to see if their business interruption insurance can help them weather the storm.

Business interruption insurance was created in response to situations where businesses sustain physical damage (such as fire, wind, water, etc.) that prevents them from operating – everything hinges on there being “damage to insured property”. The various different coverages and extensions you add to your business interruption policy all relate back to that key physical damage.

Commercial Insurance Executive Dave Parker explains, “Business interruption coverage is only triggered when there is an insured “property loss” at your business premises. If there is damage to your property at your business premises the business interruption coverage will kick in. If there is an insured property loss to a neighboring property (where a civil authority restricts access to your business) there might be business interruption coverage under the “interruption by civil authority”. Again, there would need to be an insured peril (fire, wind, water, etc.).” 

In the case of COVID-19, there is no damage to insured property preventing normal business. When we look back at SARS-related claims, we see that many business interruption claims were not covered because standard policy wordings only covered physical damage caused by named perils; courts held that neither contamination nor quarantine constituted “physical damage”. But that’s not to say things haven’t or won’t change as our current situation evolves. Coverage is tied closely to and affected by court decisions. And it is simply too soon to tell how things will be interpreted in regards to COVID-19.

We are experiencing the first global pandemic in years where the world is united in its efforts to control the rate of infection to prevent unnecessary deaths. It is horrible and scary…more so because we’ve never faced this situation or having to make these hard choices before.

The good news is that the government recognizes how much pressure businesses (and individuals) are under as we attempt to flatten the curve. Here are some articles, just in case you missed them, that discuss options to help businesses survive COVID-19.

https://www.alberta.ca/covid-19-support-for-employers.aspx

https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses

https://www.cbc.ca/news/politics/economic-aid-package-coronavirus-1.5501037

As your insurance professional we are here to help you. We are here to answer any questions you may have. And to go over your existing coverages anytime you need clarification. We are not claims experts – our opinions about claims are just opinions. If you want to make a claim, we are here to help you through that process.

As the COVID-19 situation progresses, we are keeping on top of the insurance implications. In addition, we are continuing to advocate for you – our valued clients – by sharing your hardships and ensuring your voice is heard.

We may not have solutions to mitigate risk for a pandemic in place right now. But, we have a chance to change how things like this are handled in the future. We are learning. The insurance companies are learning. And we will do better – together.