The impact of COVID-19 on businesses is still evolving, creating a time of great uncertainty for business owners. One area of potential concern relates to business insurance.
Owners may be wondering if any losses resulting from additional expenses, business interruption or lost revenue caused by this pandemic will be covered by their insurance policies. Unfortunately, most policies will not cover such losses. When an insurance policy uses a property coverage form as the basis for coverage relating to business income or interruption and/or additional expenses, nearly all such policies include a specific exclusion (CP 01 40 07 06 [Insurance Services Office Inc. (ISO)] or CL0700 1006 [American Association of Insurance Services (AAIS)]) that applies to situations involving a virus or bacteria. Likewise, ISO’s BP 00 03 07 13 Businessowners Coverage Form for business income coverage, which is typically applicable for smaller businesses, excludes protection for incidents caused by bacteria or viruses. Insurers include these exclusions because it would be difficult to calculate a reasonable premium for an incident that has not happened and whose impact would be almost impossible to predict.
Another potential insurance concern relates to third-party claims of bodily injury. If negligence is claimed against a business for insufficient protection against the spread of the coronavirus and that results in bodily harm, general liability (Coverage A) might be triggered. Furthermore, Coverage B under general liability might be triggered if someone claims his/her quarantine (false imprisonment) is the fault of the business. Companies should be aware if their general liability policies have exclusions related to contaminants, mold, bacteria, communicable diseases, or similar causes.
Property owners should consider whether or not it is appropriate to add a home business endorsement or additional personal liability coverage if the impact of COVID-19 is causing them to work from home and/or keep their kids home from school. In addition, owners of rental property, even those who offer short-term home-sharing through Airbnb or BVRO, might want to consider pausing additional coverage until they are once again able to rent out such properties.
Policyholders need to make sure, as the impact of the coronavirus pandemic continues to unfold, that they completely understand the coverage their policies provide (or don’t provide). In order to pursue any potential claims within the specified time limits established by their policies, they will need to maintain and submit the required records. Business owners should also review policies addressing event cancellation, disability, workers’ compensation, directors and officers, and errors and omissions to determine the extent of coverage, if any, for potential claims related to COVID-19.