Business interruption insurance will either be an add-on to a commercial property insurance policy or a stand-alone policy. Business interruption insurance covers loss of income, contingent business interruptions, and possibly losses due to actions by civil authorities.
Business interruption insurance typically covers business losses, such as lost profits, unavoidable fixed costs (such as rent, operating expenses, and other costs that continue to be incurred notwithstanding the pandemic), cost of actions taken to mitigate business losses, and reasonable expenses to allow the business to continue operating.
Business Interruption Insurance Coverage
Business interruption insurance provides coverage for the sustained loss of income due to your business being shut down. The shutdown generally must be caused by a covered cause that results in direct physical loss or damage to the property. Many mayors, county judges, and other local authorities have already declared that the COVID-19 coronavirus is a physical damage to property because of the length of time it can survive on both hard and soft surfaces and the cost to properly clean such surfaces.
Contingent Business Interruption Insurance Coverage
Contingent business interruption coverage covers business losses resulting from loss, damage, or destruction of property owned by a supplier or customer. For example, if the COVID-19 coronavirus shut down a supplier and prevented the supplier from providing products and services essential to your operation, you would be able to recover under your contingent business interruption insurance coverage.
Law or Civil Ordinance and Ingress or Egress Insurance Coverage
Law or civil ordinance and ingress or egress insurance provides coverage for business interruption losses when a civil authority prohibits or impairs access to your premises. Depending on the specific policy language, such coverage may require that the access restriction results from a physical loss—such as the COVID-19 coronavirus.
In an attempt to slow the spread of the COVID-19 coronavirus, city, county, and state governments issued sweeping orders requiring restaurants, hotels, retailers, and other businesses to close, and those that are allowed to stay open to do so in a reduced capacity (such as restaurants open for take-out or delivery only). The orders also call for people to remain at home as much as possible, thus depriving businesses that remain open of their usual customers. Coverage for these types of losses could be provided by law or civil ordinance and ingress or egress insurance.
Virtually every restaurant, hotel, and retail store in the world has incurred substantial business interruption losses as a result of the coronavirus pandemic. Suppliers are raising prices or going out of business and customers are disappearing.
Business interruption insurance claims are not cookie cutter calculations. They are nuanced and complex, taking into account the unique aspects of your business. We get it. And, we know what we’re doing. Let us go to work for you.