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Coronavirus- Will My Business Income Insurance Pay If I Have To Shut Down My Business Because Of The Coronavirus?

Do I have business income insurance if I have to close due to the coronavirus (COVID-19)?

Coronavirus and business income insuranceMany businesses are worried about being affected by a business closure due to the coronavirus.  We have had several business call and ask if they have business income insurance if they are forced to shut down due a public health issue.

Unfortunately, the insurance industry is slow to respond to these contemporary issues.    

Most traditional forms of business income coverage do not address the indirect effects of outbreaks and pandemics, because of public fear of travel.

The three industries that are most affected by this are the travel & tourism industry, and the professional sports industry and entertainment industry.  These industries tend to draw large crowds of people in close proximity.  And the government is warning against being in large crowds ion confined areas to prevent the spread of the disease.  Cruise lines and airlines are being very flexible with their customers in their cancellation and re scheduling processes during this time.

Eventually, we can see the warning affecting other industries, such as restaurants and retail stores.  And as this happens, we can see the question of whether or not business income insurance will pay for the lost business associated with any required shutdowns or closures.

The Maryland Insurance Administration Issued An Advisory on Business Income Insurance

Our friends at the Maryland insurance administration issued an advisory on business interruption insurance with regards to the coronavirus pandemic.  Click here to read the advisory bulletin. 

Why wouldn’t business income insurance pay if a business has to shut down for the coronavirus pandemic?

Business income insurance  coverage requires that the trigger for the business income loss be caused by covered cause of loss under the policy.

So isn’t a closure due to civil authority a covered loss on the business income insurance?

The language for the civil authority cause of loss in a standard policy will not cover a forced business shutdown due to the corona virus.  The wording states that

“Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Causes of Loss.”

A shut down due to a viral pandemic caused by the COVID-19 coronavirus would not trigger the business income insurance coverage.  This is due to that there is no direct physical loss of or damage to property that is causing the civil authority to shut down your business/

When it comes to the state or the nation declaring that businesses be closed for a period of time due to the virus there is currently no business income insurance endorsement that will provide coverage during this shut down.

ISO (Insurance Services Organization), who writes insurance policy forms is reviewing the issue of the effects of the coronavirus on business income insurance.  ISO is considering writing forms that would have either a dollar limitation or a time limitation for business income insurance in the case of a shutdown due to a pandemic, such as COVID-19

Insurance carriers are also looking to write their own forms but these forms must be approved by the Maryland Insurance Commissioner and reviewed and also the rates for the endorsement must be determined.   Unfortunately, the insurance industry works at a snail’s pace and most likely these features will not be available in time to

So can your business do in the meantime?   Do what you can to stop the spread of the coronavirus.

  • Make sure that you are discussing proper hand washing techniques
  • Encourage employees that are sick to stay home and do not return to work until they are fever free for 24 hours
  • Allow employees to remote work if possible
  • Develop a communication plan to keep employees up to date with the status of the virus
  • Assess staffing, what work is crucial and what employees can do that task
  • Provide disposable wipes so that commonly used surfaces such as doorknobs, desks, keyboards can be whipped down
  • Begin cross training now to avoid gaps in production
  • Can business operations be conducted at alternate locations if the current location is quarantined?
  • Stock up on basic office supplies as well as supplies needed for production and other work task
  • Perform routine cleaning of the office (weekly). Ensure that surfaces are whipped down

If you do need to travel , make sure to check your travel insurance policy.  Some have coverage for cancellation for any reason and other do not and have exclusions for pandemic outbreaks.

As we always advise, please check with your specific business insurance policy and insurance agent to discuss your actual insurance coverage.  Policy coverage varies by company and by state.  The examples we used was from a ISO form that is filed in the state of Maryland.

*Please note that policy eligibility and policy coverage vary by company and by state.  Please contact your insurance company or insurance agent to see how your situation will affect your specific insurance policy.

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