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Business Interruption Insurance and COVID-19: Information for Small & Medium Businesses

By Burg Simpson
April 23, 2020
4 min read

Many businesses are closed due to our nation’s response to the COVID-19 pandemic. These closures are devastating to business owners and their employees. Even if company operations are partially running, a slowdown in business or the cancellation of events is likely to cause financial loss.

Businesses are closed for a variety of reasons. Some have shut down in response to governmental orders that non-essential businesses close for a certain period. Owners or employees may actually be infected with the virus. Some companies are dealing with actual or suspected COVID-19 contaminations. Whatever the reason your business has been affected, it is a good idea to assess if commercial insurance covers the loss of income and expenses.

Business Interruption Insurance

Many commercial insurance policies have Business Interruption Coverage. This coverage protects against loss of income and expenses when a business closes or slows down operations due to a covered loss. Typically, events such as fires, storms, and water damage close a business for a certain amount of time, disrupting business income and triggering the Business Interruption Coverage. Based on the language of the insurance policy, and the unique events to each business, COVID-19 interruptions might be a covered claim. Interruptions to supply chains may also be covered if you have that type of coverage.

It is important to assess the insurance policy and determine whether the closure was due to physical damage, loss or a covered peril. In order to trigger coverage, most policies require physical loss or damage. This requirement might be applicable to virus contaminations or other events. Whether your business suffered a physical loss, damage or covered peril is going to be unique to your situation and the wording in your insurance policy.

Even if your business was not directly contaminated with the virus, some commercial insurance policies might cover governmental ordered shutdowns, event cancellations, supply chain interruption, and the like – known as “Civil Authority” coverage (typically added through an endorsement to commercial property and/or business income loss policies.

Unfortunately, some policies may contain exclusions which insurance companies may rely on to try and deny these kinds of claims, such as a “virus” or “virus and bacteria” exclusion.

Helpful Tips for Businesses Affected by COVID-19 

Here are some helpful tips that apply to most commercial insurance policies and claims of this type:

  • Obtain and review your entire policy. It is important to get a complete copy of the entire policy including all declarations pages, policy forms, and endorsements. Of course, you should review the policy and comply with all requirements.
  • Timely submit claims and give notice of potential claims. Most insurance policies require claims to be submitted timely, including notice of potential claims. If you fail to timely submit the claim, it may provide the insurance company with an excuse to deny it. Timely notice of all claims is especially important if you are renewing your policy.
  • Keep detailed notes and records. Create a timeline of events. Document when, how and why you shut down. Itemize and keep records for all losses including paid leave to employees, decontamination costs, discounts to customers, and all other expenses related to your loss of income. Keep all records and documents in a central place.
  • Have your insurance policy and situation reviewed by a legal professional.

If your claim has already been denied, or if you have questions about your insurance coverage, the experienced lawyers at Burg Simpson may be able to help. We are monitoring COVID-19 legal developments, and we remain open and available to assist your business with respect to these important insurance matters. Call Tom Henderson at Burg Simpson at (720) 500-5825 or fill out our FREE CASE EVALUATION form to obtain the expertise only a highly skilled business lawyer can provide.

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