Insurance Law

COVID-19: Insurance Tool Kit For Businesses

1. Assemble copies of your commercial property, general liability and any unique policies such as pollution legal liability policies. Forms vary greatly. Which form you have can impact your ability to succeed in successfully making a claim.
2. If you have policies going back to 2005, it could prove helpful in analyzing whether special exclusions were properly added to your policy and thus whether they may be unenforceable.
3. Please keep in mind that you will hear a great deal of incorrect information regarding certain coverages, such as business interruption coverage. Do not be discouraged. The wrestling for coverage has already started. Do not let the insurance industry dissuade you from pursuing viable claims. There are ample arguments to be made in favor of these critical coverages.
4. Set out below are a number of coverages that should be considered.

Business Interruption Insurance

Business interruption coverage is intended to protect a business from financial losses as a result of a covered event. Policyholders have very broad and important expectations regarding such coverage.

1. Triggering Events: Business interruption insurers use different approaches to what triggers coverage:
   1. Nature of the Risks Insured:
      1. All risks of physical loss: Policies covering all risks of physical loss the broadest coverage. Care must be taken to review any excluded causes of loss.
      2. Specified Causes of Loss: The listed covered causes of loss must be reviewed to determine whether the recent events trigger coverage. In the most restrictive coverage, coverage for civil commotion is covered and is being urged as a basis for coverage for some COVID-19 claims.
   2. Type of Injury Covered: Many misleading statements have been made about this and similar triggers of coverage. General statements that an epidemic will not trigger this coverage are misleading. The circumstances of the loss and whether it leads to business interruption losses must be considered. There clearly are things involved with the COVID-19 pandemic that will lead to covered loss or damage.
   1. 1. Direct physical loss of or damage to property: Where use of the property has been lost as a result of the threat of contamination, the policyholder can urge coverage is triggered. Similarly, given the government orders barring use and what we know about COVID-19, insureds can urge there has been a physical contamination of the property.
      2. Direct loss: Some policies changed to this phraseology. Explanations provided by the carriers as to the meaning of the change in some renewal policies are misleading and suggest that this means the same thing as “direct physical loss.”
      3. Order of a Civil Authority: Most policies include some form of business interruption coverage involving orders of a civil authority. Typically, the trigger for coverage is (a) loss or damage to the property insured, or (b) injury to other property connected with the order of a civil authority affecting use of the insured property. Some additional limitations apply to this coverage:
         1. Limited Period of Coverage: Many policies limit this coverage to 30 days from a designated date, usually some waiting time after date of the order.
         2. Proximity Limitation: Some policies require that if property other than the insured property is injured, the other property must be within a specified distance. Given the broad designation of the disaster zone in Dallas and other cities and counties, this limitation may ultimately not be found to impact coverage.

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