Is there any coverage for loss of income to a business shut down by a pandemic?
The short answer, unfortunately, is typically no.
Most businesses have a Business Owner’s Policy which covers loss of income due to physical damage. For example, a pipe bursts in the wall and floods the business. Repairs must be made before the business can be open. The Loss of Income coverage would pay a pro-rated amount per day until the repairs were done and business could resume.
Shutting down a business due to illness and quarantine doesn’t meet the requirement of “physical damage.”
While there are some endorsements available for business policies it is not clear if they could be used for a pandemic situation. The most common would be Contingent Business Interruption. This might be used if the supplier for a business stops delivering goods or services which makes it impossible for the business to keep going.
Some commercial property policies provide coverage for loss of business due to a “civil authority”
Restricting or prohibiting access to a business. This would most likely be found in an “all risk” commercial policy or as part of the contingent business interruption endorsement but not necessarily. Every company has its own language and interpretations.
Not all insurance is the same. The insurance industry is constantly evolving and changing. For example, in the Republic of the Congo they now have endorsements for business insurance that cover loss of business due to outbreaks of Ebola. But those sorts of policies have not found their way into the United States at this time.
There are pending lawsuits over loss of business due to the government’s response to the Covid-19 pandemic. However, the outcome is far from clear and will vary widely from state to state and court to court. It will likely be years before any clear guidance is available or the policies changed.
There are small business loans that will be made available in the coming months for businesses impacted financially by the shutdowns. Follow this link to access the SBA’s Economic Injury Disaster Loan Program. https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
We recommend you put in the claim for Business Income with your insurance company and let them determine if the coverage exists. We are here if you need any assistance with setting up your claim!
Contributed by Victoria Sutherland, Licensed Insurance Agent