COVID-19 and Business Insurance

If you live in any city across the world, you’ve noticed a change. No traffic on the streets. Lights of most businesses are off. A spooky quiet that many of us have never witnessed in our lifetimes. In Fort Lauderdale, the famous Las Olas Blvd, home of quaint boutiques, locally-owned restaurants, and other related businesses is eerily vacant; a modern interpretation of the country-western movies where the villain dressed in black gallops into town and everyone boards up their doors and windows. Except, today’s villain, COVID-19, is invisible and it’s not leaving any time soon.

As the Federal government introduces these huge small business stimulus projects during the COVID-19 virus pandemic, many business owners still don’t know what the future holds. Will the stimulus money be enough? How will my business be affected after the country slowly reopens? What happens if we don’t find a vaccine and in six months we are back where we are today, or worse?

Anyone who owns a business is and should be asking those questions. In my opinion, they should also be closely examining their own insurance policies which could help save a business should any of these terrible events occur.

Some Business owners I’ve spoken to have not even read their policies because they assume COVID-19, also known generally as the Coronavirus, related closures are not covered because the pandemic is an “act of god’ However, this may not be true, Many policies are interpreted differently and there could be coverage for losses, both past, present and possible future in these insurance contracts.

In order to understand your insurance contract, it’s helpful to have a base-line understanding of how these contracts are generally written.

First, if you are a business, you may have Commercial Property Insurance. The property insurance policies generally cover damages to buildings or other business property where a covered cause occurs such as a fire or windstorm. After 2006, Insurance Services Office (ISO) introduced an exclusion in many of these policies for a loss due to a virus. In other words, a business could not collect any insurance money under its property insurance if a virus or microorganism caused the loss. However, businesses that purchased all-risk coverage may not have had a COVID-19 virus exclusion.

Even if you purchased an all-risk property insurance policy, the insurance company may argue that the virus did not cause direct physical loss or damage to your property which is generally required to recover damages. This is where it gets a bit tricky and whether your Insurance company will pay your damages could hinge on how the term “physical damage” is defined. If a property or business has become physically contaminated by a virus, such as COVID-19, there may be an argument that the direct physical loss required under the insurance contract has occurred since the business is unfit for occupancy.

An additional “add-on” to existing property insurance policies or a completely separate policy to look for in your commercial policies is what is commonly referred to as Business Interruption (“BI) insurance. BI insurance can cover loss of profits, contingency costs, fixed costs, costs of mitigation (e.g. what did the business do to repair the damage caused by the virus) and other reasonable expenses that would have allowed the business to operate normally.

I believe it’s crucial to examine every business interruption insurance policy, especially in relation to what is commonly referred to as Civil Authority Coverage. Speaking plainly, Civil Authority coverage may kick in when the government (local, state, or federal) restrict customers’ access to your business. When there is a quarantine, nobody stays at hotels or eats in restaurants. Under the Civil Authority claims, a business owner is NOT suing the government. Instead, they are claiming that the BI policy they paid premiums for should compensate them since their business is being interrupted by a peril that is causing the government to effectively interrupt the business.

So, as you can see, it can get complicated trying to read through these policies. As of late March 2020, Meldon Law has been offering a COVID-19 related FREE evaluation of these policies to any business owner as a service to our great state of Florida. We will offer our opinions on how we would make a claim if warranted and allow the business owner to make their own claims. Although most claims will result in denials, we feel that it would be a huge victory if we can help even one business and its employees successfully collect from an insurance carrier. So give us a call at 1-800-373-8000 if you want a pair of second eyes to read your policies to see if you are covered.