Coronavirus: Commercial Insurance Perspectives

As the world works to understand and respond to the COVID-19 pandemic, staying informed is one of the top things a business can do to understand how it might be impacted (or protected). While the situation remains fluid, and we know that every business’s situation is unique, we wanted to share some information on questions we’ve been getting asked a lot lately.

Commercial Property

Commercial Property Insurance Forms have multiple layers and consist of physical property coverage, as well as potential coverage for business interruption. A typical commercial policy is meant to cover physical buildings, assets, tangible items, etc. against direct physical loss or damage. There must be direct physical loss or damage to the covered property from a named peril, not otherwise excluded for coverage to apply.  An example of physical damage would be a fire, on-site at the insured location causes damage to buildings, computers, and equipment.

Typically, with COVID-19, physical damage coverage is not triggered.

While you may not experience a physical loss during this pandemic, you may have a loss of business due to an interruption.

Business interruption coverage can be further evaluated as follows:

  1. Business interruption due to physical loss: an example would be a fire that occurs on premises and prevents you from opening for business. This coverage typically requires a trigger, such as a fire or other specific cause of loss resulting in damage to physical property before any consideration for a claim is provided.
  2. Contingent business interruption: this coverage is defined by experiencing a loss or incurring additional expenses as a result of a supplier or vendor having a physical damage loss, resulting in the inability to provide your business with the necessary supplies, etc. to maintain production and business continuity. This coverage typically requires the supplier or vendor to have sustained a covered physical damage loss before coverage is considered.
  3. Civil authority: provides coverage for loss of income when a government authority denies access to your business. This is typically implemented during a natural disaster (fire, hurricane, tornado, etc..) or life-threatening situation in which masses of people are restricted from specific areas. This coverage normally has both a time element and a distance element: meaning, there is a specific time period that must be incurred before coverage is triggered and there is a limit to how long the coverage may apply; and often times there is a specific location or radius that is required for coverage consideration. An example would be an explosive device goes off in a shopping mall, the stores with physical damage would have coverage due to a trigger for physical damage from the explosion, as well as business interruption. The stores on the perimeter of the mall may be closed by civil authority, but may not have any physical damage; however, they may have coverage considered for business interruption as they were within a specified mileage from the explosion and were required closed by civil authorities.

Workers’ Compensation

Workers’ compensation insurance helps employees recover from work-related injuries or illnesses and generally will not apply in a pandemic outbreak. Every state has its own workers’ compensation insurance laws and regulations that govern the coverage available. To file a workers’ compensation claim, the employee will need to demonstrate that the injury or illness arose directly out of the course of their employment.

While at this time we are unsure of how the insurance carriers and the government are going to respond to various outcomes and impacts of COVID-19, we recommend that each person or business keep track of financial receipts and documents which could demonstrate the adverse revenue and expense impacts as a direct response of the pandemic.

We stress each case will be handled on its own merits. We are not claims adjustors, and each policy may respond differently. The information provided is to assist you with understanding and planning during these times.

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