This is a very common question being asked of insurance companies by their commercial customers. The short answer is yes you can file a claim, but will it be covered? Most likely – no.
Each carrier will handle these claims differently when it comes specifically to COVID-19, but the majority of carriers have the same policy language and/or similar exclusions. The determination of coverage depends on the relevant facts and circumstances of each claim, and the terms and conditions of the specific policy under which that claim is made. See the CA Department of Insurance FAQs on business interruption insurance and other issues affecting California small businesses.
Here’s some helpful information to explain how business income or business interruption coverage works, brought to you by Liberty Mutual Insurance Company.
Again, all carriers have their own language. The following definitions are commonly found in most insurance policies, but may not be exact. Contact your agent for more information.
Property and Business Owner’s Policy (BOP)
For a business income loss to be covered the following must apply:
o The suspension of the insured’s operations must be caused by a direct physical loss of or damage to property at the premises described in the declarations.
o The loss or damage must be caused by, or result from, a covered cause of loss.
The closure of a premises due to the presence of an infected person or the fear of infection would not in itself be direct physical loss of, or damage to, Covered Property.
There are policy exclusions that potentially apply including virus and contamination.
The section below references certain provisions from some of the relevant coverage forms:
Base Property form, CP 00 10:
We [insurance company] will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.Business Income (and Extra Expense) Coverage form, CP 00 30 and Business
Income (Without Extra Expense) Coverage form, CP 00 32
Requires direct physical loss resulting from a Covered Cause of Loss.
The Civil Authority provision states: “When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain, and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises….”
Therefore, if there is no direct physical loss from a covered cause of loss, coverage would not apply.
Cause of Loss – Special form, CP 10 30
A. Coverage -When Special is shown in the Declarations, Covered Causes of Loss means direct physical loss unless the loss is excluded or limited in this policy.
Cause of Loss – Broad and Basic forms (CP 10 20 and CP 10 10)
Virus or contamination are not a covered cause of loss.
Business Income from Dependent Properties (CP 15 08 and CP 15 09)
Absent direct physical loss from a covered cause of loss at a scheduled location (regardless of country), there is no coverage.
Virus is excluded in the coverage form or via mandatory endorsement (shown below).
Business Owner’s Policy (BOP)
Businessowner Coverage form BP 00 03 2013 and later versions contain the Virus exclusion within the form.
Businessowner Coverage form BP 00 03 prior to 2013 versions include the Virus exclusion via mandatory endorsement BP 06 01.
The Virus exclusion is included via mandatory endorsement CP 01 40.
General Liability and Umbrella
There may be limited General Liability, Umbrella and Excess exposure created by communicable disease outbreaks. It is important that you, or the policyholder should submit a claim anytime a third party makes a claim.
Each claim is reviewed individually by our claims professionals. The presence of an employee with a virus would not be a direct physical loss or damage to covered property. In addition, the pollution/contamination and virus exclusions should bar coverage even if there was physical loss or damage.
If you have further questions or feel would like to submit a claim to your insurance carrier anyway, we recommend you contact your agent to discuss your individual situation.
- Liberty Mutual Risk Control Resources and Coronavirus Guidance
- The Centers for Disease Control and Prevention (CDC) for the most accurate and up-to-date
- CA Department of Insurance issues FAQs on business interruption insurance and other issues affecting California small businesses
The above info is being shared to you for informational purposes and should not be construed or relied upon as legal advice or a guarantee of coverage. The terms of the policy, as well as applicable law apply.