The interpretation of business interruption insurance can be complicated when dealing with COVID-19 claims. While coverage is already incredibly tricky to navigate without even being specialized, critical infrastructure may require specialized business interruption coverage.
What is “Critical Infrastructure?”
Critical infrastructure consists of any assets, systems, and networks – whether physical or virtual – that are vital to the United States. In the event they are destroyed or incapacitated, these systems would have debilitating effects on national security, the economy, and public health and safety.. The U.S. Department of Homeland Security (DHS) is the federal agency charged with the oversight of protection for our nation’s critical infrastructure. DHS lists 16 critical infrastructure sectors and assigns primary sector-specific responsibility to each, including:
Commercial Facilities Sector
Critical Manufacturing Sector
Defense Industrial Base Sector
Emergency Services Sector
Financial Services Sector
Food and Agriculture Sector
Government Facilities Sector
Healthcare and Public Health Sector
Information Technology Sector
Nuclear Reactors, Materials, and Waste Sector
Transportation Systems Sector
Water and Wastewater Systems Sector
Critical Infrastructure and Specialized Business Interruption Coverage
Industries deemed part of our country’s critical infrastructure by the DHS that have remained open during COVID-19 stay-at-home orders have likely encountered disruptions to supply chains, construction, customers, and labor, among many other crucial issues. These disruptions and others have resulted in businesses closing entirely or having to operate at a limited capacity.
While traditional policies may not cover economic losses arising from the suspension of operations due to a health crisis or COVID-19, the insurance industry has made various specialized plans available. Business interruption insurance policies should be reviewed closely to determine what coverage applies, including:
Causation and Financial Loss
In order to trigger coverage, losses from business interruption must be caused by a covered peril. The language of your insurance policy will dictate whether there is coverage for critical infrastructure.
Leader property endorsements can be included in business interruption policies to provide coverage to the insured for a direct physical loss, damage, or destruction to business property. The subject property can be a separate business located within a specified distance to the insured’s property that attracted business for the insured. For instance, in the event a mall closed due to a government order and is near a critical infrastructure element such as a local restaurant that can only perform takeout orders, then that restaurant would likely qualify for leader property coverage in the event it lost business directly due to the mall closure.
Contingent Business Interruption
Contingent business interruption coverage protects against the loss of revenue a business suffers when a third-party supplier, distributor, or another key element it relies upon to produce a product or service suffers a loss. Meaning, the coverage is contingent upon losses suffered by a different, related business.
If a business identified as part of the country’s critical infrastructure, such as a distributor of personal protective equipment (PPE), takes out a contingent business interruption policy that lists the PPE manufacturer as a covered location. Due to a fire, all the PPE produced by the manufacturer is destroyed. Since the business would be unable to generate any revenue, but because the distributor insured against this type of loss with contingent business interruption, it would likely be covered even without its own physical damage.
Direct physical loss or damage is a common requirement of business interruption claims. Contingent business interruption coverage differs slightly in that the physical damage must occur specifically at what the policy defines as a dependent location that isn’t the actual location of the covered business.
Coronavirus Business Interruption Attorneys
Those who work in businesses deemed part of America’s critical infrastructure are also feeling the blows of lost revenue due to COVID-19. We understand the frustrations many business owners are feeling as the virus continues its spread. These frustrations will likely continue to mount as businesses try to recoup their losses under business interruption policies. At Raizner Law, our experienced attorneys have successfully handled complex cases against the world’s leading insurance carriers. If your claim has been wrongfully denied, delayed, or grossly underpaid, contact us today to see how we can help.