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Does Business Interruption Insurance Cover Pandemic Losses?

By July 29, 2020 No Comments

An unforeseen, yet growing issue within commercial insurance is about the value of losses related to the Covid-19 pandemic. 

Businesses typically purchase interruption insurance in the event of physical damage from a natural disaster, repair or other incident. The payout from the policy helps companies fill the gaps for operating expenses while repairs or other improvements are made.

However, many interruption policies have specific language written in that notes this coverage does not extend to virus or bacteria issues, like Covid-19. 

A Nationwide Issue

People are taking on their insurance companies from California to Michigan in certain virus exceptions that are written into policies and the results so far are mixed.

In the case in Lansing, Michigan, a state judge ruled in favor of insurers in that some “tangible alteration to property is required to trigger coverage”.

How Interruption Insurance Would Cover Losses

Some policies do cover civil orders to shut down, such as the closure requirements certain states instituted to help curb the spread of Covid-19 through less person-to-person contact. This is where a judge and/or jury would come in to interpret some of these specific clauses to determine what exactly, if anything, insurance companies are required to pay out. 

On July 8, Alabama Governor Kay Ivey announced a $100 million program to help small businesses with general losses, some of which could surely go to cover what interruption insurance won’t or hasn’t paid out. 

In short, because the issue of pandemic-related financial, not physical, losses is so new, there isn’t a clear answer yet on how courts across the country will react to and rule on this complex challenge for businesses who’ve suffered losses. Although some courts are siding with the insurance companies in initial cases, this is a battle that’s far from over. 

If your business has been affected by Covid-19 losses and your business interruption insurance refuses to pay out, it’s worth your time to contact a qualified insurance attorney to understand what further options you may have. Call Bevill & Bevill, LLC today at (205) 221-4646 to speak with our professional insurance advocacy team.