With federal, state, and local governments forcing “non-essential” businesses to shut their doors, many companies are wondering if the insurance coverage they carry for themselves could cover their losses due to the ongoing pandemic. The answer, as it so often is in the legal world, is perhaps. There is litigation currently ongoing throughout the country regarding this exact topic. The outcomes of these cases are going to be heavily dependent on both the exact language of the insurance policy as well as the jurisdiction in which the litigation is brought.
First, let’s take a look at what types of insurance policies might possibly cover losses due to COVID-19. Perhaps the most obvious one is business interruption insurance. Typically business interruption insurance covers loss business income when there is a physical loss to the property where the business is located. For example, this could mean loss profits due to a company unable to conduct business because of a fire or natural disaster. What is less clear, however, is whether this includes forcing to shut down a business due to a virus. What if, for example, an employee tested positive for COVID-19 and the business was worried about it spreading it through the ventilation system and therefore shutdown? It could reasonably be argued the building is uninhabitable due to coronavirus and therefore there is a physical loss.
Another type of policy that could potentially lend coverage is civil authority coverage. This is often times simply a clause in a larger policy. Civil authority insurance provides coverage for lost business income due to a government entity denying access to the business property. Similarly, ingress/egress insurance provides coverage when an insured is unable to access their business property due to a hindrance caused by a third-party. For example, if there is a chemical spill at a business next to yours and there is a cordon around the block where your business is located rendering your business inaccessible, your lost income may still be covered under this policy even though there is no actual damage to your business property.
As previously mentioned, these types of insurance questions are already being litigated in several state and federal courts, including Louisiana and California. The outcomes of these cases can vary from state to state and from policy to policy. At Pilka & Associates we are ready to answer your questions, review your policies, and help in any way we can. Give us a call today.