Questions and Answers for Businesses Seeking COVID-19 Insurance Coverage

By Anthony W. Merrill and Craig A. Logsdon

1. What type of insurance coverage may be available for losses to my business?  The type of coverage that may be available depends on the nature of loss you suffered and the wording of your insurance policies. Companies that lost business during the pandemic response may have “business interruption insurance” or “contingent time element” coverage as part of a property insurance policy or packaged program.  Some policies may also have a “civil authority” clause that, under some circumstances, may provide coverage when the government orders the business to close. Other types of policies may apply to more specific circumstances, such as event cancellation insurance, travel insurance, claims made by third parties for injuries and other situations. You should review all of your policies for possible coverage.
2. How do I know if I have business interruption coverage?  Most often, business interruption insurance or other coverages potentially applicable to these losses are contained within property insurance policies or comprehensive policies that a business may purchase.  Cyber or data security policies may also have this type of coverage. There could also be business interruption coverage in other policies so you should review them all.
3. Are there reasons that business interruption insurance may not cover my lost profits?  Yes.  The insurance industry has published statements reminding policyholders that it does not believe business interruption coverage under a typical property policy will apply.  Business interruption coverage generally requires direct physical loss or damage to property, which the insurance industry denies occurs in most instances involving COVID-19, and the policies may also include exclusions for viruses and pandemics.  Civil authority policies may have the same types of hurdles to recovery.
4. Does my state have laws, regulations or policies specific to COVID-19 losses?  Insurance is largely regulated at the state level and, on the topic of COVID-19, it is developing.  Some state legislatures have proposals that would require business interruption coverage under certain circumstances, but, as of the date of this posting, we are aware of none becoming law.  State insurance regulators may also weigh in on various issues.  For example, California’s Insurance Commissioner has issued specific guidelines for insurance companies handling COVID-19 claims.
5. What is the status of federal legislation to require insurance coverage for COVID-19?  Two proposals in the House of Representatives address business interruption insurance for COVID-19 losses, but neither is yet out of committee. The “Business Interruption Insurance Coverage Act of 2020" would void exclusions that cover pandemics or government shutdowns.  The Pandemic Risk Insurance Act would create a “reinsurance fund” to encourage insurance companies to pay COVID-19-related losses.  There is no indication what the final drafts of these bills would look like or if they will become law.
6. How much money can I recover under a business interruption policy?  If your policy provides coverage, you will have policy limits reflecting the maximum amount you could recover. Up to that number, the amount of recovery is generally based on profits that would be expected had the events not occurred over a limited time period, sometimes called the “period of restoration." For a business ordered to close, whether the business is entitled to profits that it would have enjoyed with no pandemic at all may be up for debate.  Another option would be what profits the business would have had if were allowed to remain open during the pandemic.
7. How do I file a claim?  Your policy should tell you who to contact to file a claim and will have a deadline for doing so.  Make your claim timely.  You should review the policies that may provide coverage and provide documentation of your business losses.
8. Should I file a claim if my policy does not appear to provide coverage?  You may want to consider doing so, especially because there is a possibility that laws will expand the availability of coverage for COVID-19-related losses.  Even though the policies may not appear to provide coverage today, the law may change.
9. What do I do if a claim is denied?  If the insurer provides you a reason for denial that you can remedy—such as a lack of documentation—then provide the supplemental information.  If the insurer does not pay and you believe it should, your policy should have an avenue to appeal the decisions and there will likely be a deadline for doing so. Because many insurers have already refused to pay on business interruption policies for COVID-19 losses, some policyholders have filed lawsuits to force coverage.
10. Can I purchase business interruption insurance now for COVID-19 losses?  Any business interruption policy currently sold will almost certainly exclude losses from the ongoing pandemic.