3 Types of Insurance Coverage That May Protect Your Business From COVID-19
The COVID-19 pandemic is having drastic economic impacts on companies around the country, resulting in business closures, event cancellations, unmeasurable loss of revenue, and disruption of supply chains.
With reports saying that it could take three years for the U.S. economy to recover from the coronavirus pandemic, negative economic effects are already being felt in almost every industry, especially hospitality, entertainment, travel, and transportation.
In recent years, insurance companies across the country introduced limitations and exclusions into their policies for pandemics, epidemics, viruses, and diseases. However, there are certain types of insurance coverage – namely three – that may still be available to protect your business from the COVID-19 pandemic.
Business Interruption (BI) Insurance
Many companies purchase Business Interruption (BI) insurance to protect against losses incurred as a result of suspended operation due to physical property damage. More often than not, business closures caused by pandemics and shutdowns do not count as “physical property damage,” though there may be exceptions.
However, actual contamination of your property may constitute “physical damage” for Business Interruption insurance purposes.
Unfortunately for business owners, many insurance companies added specific exclusions for viral and bacterial infections to their Business Interruption coverage following the SARS epidemic. However, a business owner may still have coverage given that viruses are no bacteria. So, if your policy only excludes coverage for bacteria, you may obtain coverage for COVID-19.
Supply Chain Insurance or Contingent Business Interruption (CBI) Insurance
Supply chain insurance or Contingent Business Interruption (CBI) insurance is intended to protect companies against losses caused by supply chain disruptions. Depending on the industry and nature of your business, your policy may cover the disruption of deliveries of parts or components, supplies, raw materials, finished goods, and others.
Businesses that have purchased CBI insurance may be able to have coverage for economic losses stemming from disrupted or reduced operations caused by physical damage on the property of a supplier. Some CBI and supply chain insurance policies may also extend coverage to:
- The loss of service to the insured business (e.g., loss of utility service); and
- The loss of markets for your products.
Often, CBI insurance coverage requires that the supplier must sustain the type of property damage that would be covered in the insured business’s first-party policy. As mentioned earlier, business closure due to the COVID-19 pandemic may not qualify as “property damage,” while an actual contamination event may constitute property damage.
Note: Some CBI insurance policies also include the same bacteria and virus exclusions as in Business Interruption insurance.
Event Cancellation Insurance
Last but not least, your business may be protected by the Event Cancellation. This type of insurance coverage is common for the entertainment, event planning, and sports industries. In fact, some policies expressly include coverage for cancellations due to infectious diseases.
However, in recent months, insurance companies began to exclude coronavirus disease (COVID-19). Thus, if you purchased your Event Cancellation insurance after December 2019, your policy is likely to contain such exclusion.
Find out about other types of insurance coverage for your Florida business during the coronavirus pandemic. Contact our West Palm Beach business litigation lawyers at Pike & Lustig, LLP, to discuss your particular situation. Call at 561-291-8298 to get a consultation.