As businesses continue to grapple with concerns of how to continue operations amid the new coronavirus or COVID-19, many have filed insurance claims for business interruption.
Though these claims typically arise due to natural disaster events that cause structural damage to commercial property, there may be potential business interruption coverage available based on specialized policies or endorsements already written into existing in insurance policies.
Business Interruption Insurance Endorsements
An insurance endorsement (also known as a “rider”) is an amendment or addition to an existing insurance plan, which changes the terms or scope of the original policy.
Insurance endorsements can add, delete, exclude, or otherwise alter a company’s existing insurance coverage, and can be issued mid-term, at the time of purchase, or at renewal. Riders like these are legally binding amendments to the existing insurance contract.
In response to prior outbreaks of various infectious diseases, such as SARS, the insurance industry has developed certain endorsements that specifically provide coverage for business interruption due to such diseases even absent evidence of direct physical damage.
Pandemic, Virus, and Communicable Disease Coverage
Pandemic, virus, and communicable disease coverage extensions can potentially provide coverage for business interruption and/or they can be drafted to afford coverage only in certain specified outbreaks of disease.
Because of this, business owners must review any policy provisions or endorsements in order to determine the full scope of their coverage.
Examples of pandemic and virus-related endorsements
Pandemic Event Specialized Coverage
Pandemic event policies insure companies against pathogen-related business interruption events and are aimed at providing coverage for those who experience financial damages from business interruption during pandemics. Lloyds of London, for example, implemented a specific policy that covers damages for a pandemic event like this following the Ebola outbreak.
This highly specialized type of policy specifically covers enumerated viral outbreaks or pandemics. In fact, a movie theater chain recently filed a lawsuit against Lloyds of London alleging the insurer “anticipatorily repudiated” coverage by advising the chain’s broker that COVID-19 is not covered under their pandemic event policy, because it isn’t a named disease within the plan.
Communicable Disease Coverage
One example of a communicable disease coverage extension (FM Global) covers cleanup costs, including the removal and disposal of infected items located at the business plus any public relations expenses. It can also provide business interruption coverage for losses resulting from the temporary shutdown.
However, the policy doesn’t always cover government-mandated closures, such as in the current case of restaurants and bars in many jurisdictions, as at least one infected worker or patron is required to trigger coverage.
Commercial property insurer Fireman’s Fund also offers an endorsement much like FM Global, covering direct physical loss or damage to property caused by or resulting from a communicable disease event at the premises. Much like FM Global’s policy, this endorsement only offers coverage when someone at the property, or some physical part of the property, was infected with a communicable disease and does not automatically cover businesses affected by government-mandated closures.
Limited Fungi, Bacteria, and Virus Endorsement
One example of a limited fungi, bacteria, and virus endorsement from The Hartford aims to cover the cost of damage for any direct physical loss or damage caused by fungi, wet rot, dry rot, bacteria, or virus.
The policy includes the cost of fungi removal and the cost to tear out and replace any part of the property as needed to gain access to the fungi, wet rot, dry rot, bacteria, or virus. It also covers the cost of testing performed after removal, repair, replacement, and/or restoration of the damaged property is completed.
This endorsement can exclude or limit losses. As an excluded peril, this endorsement would exclude any claim for business income under the policy. Due to the endorsement only covering specific and direct physical losses like equipment breakdowns during a 12-month policy period, it may not cover viral pandemics such as COVID-19.
Texas COVID-19 Business Interruption Claims Attorneys
At Raizner Law, we have obtained a reputation for delivering successful results for our insurance coverage clients. Our experienced lawyers have successfully handled large, complex insurance disputes against nearly every major insurance company.
Contact us today to see how we can assist you with your coronavirus business insurance claims.