The pandemic has been a major source of financial loss for many businesses. According to Axios, businesses are shelling out money on plexiglass shields and other equipment, while Yelp says that more than 132,000 local businesses have closed and more than half of them won’t reopen. Businesses are looking for any relief they can get. However, because of COVID-related coverage exclusions, they might not always find that relief in their insurance policies.

Business Interruption Coverage

Commercial property coverage often includes business interruption coverage, and many businesses that have had to close because of the pandemic have tried to make a claim.

It seems pretty straightforward—the pandemic has clearly interrupted business—but there’s a catch. Many of these policies require the business interruption to be tied to property damage. The coverage was written to cover things like fires and hurricanes, not pandemics, and many insurers have argued that COVID-related claims are excluded.

Many business owners begged to disagree. Actually, they didn’t beg. They sued. According to the National Law Review, more than 1,000 lawsuits have been filed nationwide, and more than half of these are class action lawsuits.

According to Insurance News Net, U.S. courts have generally been siding with the insurance companies denying COVID-related business interruption claims because the virus did not cause property damage. The issue hasn’t been resolved, though, as many cases are still pending. Additionally, one federal judge in Missouri ruled that COVID-19 particles were a physical substance that damaged property. Other business owners may pursue this argument in hopes of getting their claims covered.

New legislation could also impact business interruption claims. In California, for example, Assembly Bill 1552 would create a rebuttable presumption that COVID-19 was present and caused physical property damage. However, according to Insurance Journal, the American Property Casualty Insurance Association opposes the bill, and the constitutionality of this bill has been questioned.

Other COVID-Related Insurance Issues

Business interruption coverage has been a hot topic, but it isn’t the only COVID-related insurance issue.

Travel, both for business and personal trips, has also been impacted by the pandemic. Some have looked to travel insurance for compensation, but exclusions can result in claims being denied. According to CBS, some claims have been denied for various reasons – for example, because a trip was booked after the pandemic began and the pandemic was therefore a foreseeable event under the policy, or because a stay-at-home order did not count as a quarantine and was therefore not covered under the policy.

Workers’ compensation is another key issue. It’s typically difficult to file a workers’ compensation claim for a virus because it’s typically difficult to prove where the virus was contracted. However, this does not mean that claims aren’t possible, and employers should not assume that claims will be excluded. According to the National Conference of State Legislatures, 14 states have passed laws or issued orders to make COVID-19 covered as a work-related illness for workers’ compensation claims.

Insurance underwriting is changing fast. If your team needs assistance with policy updates, policyholder communication, sales or customer service, contact us. We’re here to help with both your short term projects and longer-term support needs!