Could Business Insurance Cover Coronavirus (COVID-19)?
Vicus Founders on If Your Business Insurance Policy Covers Coronavirus (COVID-19).
Below, please find a letter we sent to our commercial real estate customers and clients in New York City regarding questions we have received about whether their business insurance covers Coronavirus (COVID-19). If you’re an NYC small or medium-sized business tenant and wondering how to navigate paying commercial rent in NYC during COVID-19, please check out our post: Your Rights & A Path Forward. Additionally, we published a break down of NYC Small business Coronavirus Relief programs you can access: here. If you have any questions (even if you’re not a client), please do not hesitate to contact any of our team.
First we want to wish you and your family a happy Passover and Easter to those observing, and good health in these difficult times. As this pandemic plays out, a lot of people are wondering if they can get some relief from their insurance policies, specifically with respect to business interruption coverage.
To answer those questions and provide value-add knowledge in a time filled with uncertainty, we have partnered with prominent insurance coverage and property damage firm Wilkofsky, Friedman, Karel & Commins (WFKC). WFKC has been in communication with the New York City Mayor’s office, New York Governor’s office, and the federal government and has proposed language for an Executive Order relating to “property damage” caused by the virus’s contamination of surfaces, which prompted an unsafe working environment and subsequent office closure orders.
The bottom line is the debate on questionable coverage has only begun, and there will be lots of litigation, led by Jonathan Wilkofsky and his partner John Houghtaling, who discussed this on CNN this past weekend, in the coming weeks that will hopefully bring clarity.
In the meantime, you’ll want to understand the types of key insurance coverage you may have and the specific language and exclusions around them so you can file a claim if necessary. Given the tricky nature of insurance policies and the lack of clarity, it’s important to stay on top of this.
We are here to help and have outlined some information on a few key questions below; please reach out to us by replying to this email if we can answer questions or connect you to WFKC to review your policy and recommend next steps:
Does My Business Interruption Insurance (BI) Cover COVID-19? Each policy is different, so you’ll need to acquaint yourself with what’s in yours. Look for the key phrase: “cause of loss to trigger coverage” which will indicate the language for your Business Interruption insurance, typically purchased as part of commercial property insurance. The question is whether or not insurers consider the virus to be “physical damage,” the intent is to cover loss profits and necessary continuing expenses caused by covered property damage which is not excluded.
As of today, carriers uniformly say COVID-19 does not cause or lead to “property damage” — however, that is something that will be litigated and lobbied according to Wilkofsky.
Your policy may also have a specific “virus exclusion” clause or reference “exclusion of contamination or pollution”. But there are many policies that do not have that virus exclusion; if yours does not, Wilkofsky believes you have a stronger claim.
Your policy’s Civil Authority provision – which says the insurance company will pay for the actual loss of “business income” you sustain as a result of forced closure by a civil authority may also be in play if your circumstance falls within the definitions of the policy as to property damage. This is exactly what happened when our elected officials ordered the shut-down of many businesses due to COVID-19.
Again, the issue of whether these exclusions will preclude recovery for COVID-related losses hinges on coverage language, state-specific court rulings, and the circumstances faced by the policyholder. Talk to a lawyer who understands this. You may be covered.
What other types of insurance can I use to make a claim? If you have Contingent Business Interruption Insurance (CBI), which provides coverage for an insured that suffers lost profits because a critical supplier is unable to provide necessary supplies due to a covered peril, it may be easier for you to recover under CBI policy than a BI policy. Again, each case is different, and claims will be litigated in the coming years to provide more clarity.
You may see language about “Dependent Properties,” which are properties that contribute to the insured’s income but are not owned or operated by the insured, for example, a key supplier, customer, or magnet store or property . If you have a business that is dependent on other businesses that are closed, or customers that are unable to come in, you may have a claim.
I have an ‘All Risk’ policy, so am I covered? Do not assume that. Yes, ‘All Risk’ insurance offers some of the broadest coverage available, but those policies often exclude coverage for a virus, contagious disease, or bacteria, and they are only triggered by “physical loss or damage.” In this case, it is vital to review your complete policy and to speak to a lawyer about next steps, should you have questions.
As Wilkofsky points out, efforts are underway to convince Congress and the insurance industry to have the industry waive the virus exclusion with resulting claims being funded by Congress. In this regard, should this become a reality, there may be a benefit in placing your carrier on notice of your loss even though your policy may contain a virus exclusion so as to have the claim on record as well as the response from your insurance company.
As always, we are here to help and are trying to bring tangible resources to you as a tenant during these difficult times. If you have questions about anything we’ve touched on or would like us to connect you directly with our attorney partners, please contact us at brosenblatt@vicuspartners.
In good health,