The following article was Printed in the Daily Business Review on March 24, 2020.
Many concerned business owners have been inquiring as to whether they have coverage for loss of business due to COVID-19, better known as the coronavirus.
If you ask your insurance broker, the answer one is most likely to receive is that there is no insurer that has an epidemic or pandemic endorsement.
While it may be true that your broker does not offer this coverage, there are in fact specialty carriers that in the past have offered similar endorsements to assist businesses for Ebola outbreaks and the effect it had on businesses that were forced to close.
There was news recently that the industry’s Insurance Services Office developed new endorsement forms for specialty carriers to offer coverage for Coronavirus, but at this time I am not aware of any insurers actually offering this to clients.
Since at the time of publication the reader most likely would not have a specific endorsement for epidemic or coronavirus coverage, the next step is to determine whether the business interruption or loss of business portion of your policy will apply.
Business Interruption protects business owners against economic losses stemming from the closure of their operations due to a loss.
Losses in these contexts typically deal with fires, water losses or other events such as hurricanes, which force the businesses to close their operations as a result of being unable to function in their normal capacity.
Every policy has its own variations and definitions so it is not possible to provide a blanket statement, but generally speaking in the context of commercial policies the language dealing with business interruption typically reads as “direct physical loss or damage by a peril not otherwise excluded.”
The million dollar question is whether COVID-19 can be interpreted as a “direct physical loss” to a business owners’ property.
Additionally, most commercial policies have a civil authority provision. This coverage is triggered when the government forces a business or establishment to close down due to a physical event such as terrorism.
This coverage was contested in the courts post 9/11 when many businesses suffered loss of business due to the terrorist acts in New York City, at the Pentagon and the threat of others during that time.
A fair argument can be made that due to emergency declarations by local, state and federal officials combined with the coronavirus being interpreted as a direct physical loss, then one may have a claim for business interruption coverage under a commercial policy.
The first test case for gaining coverage benefits under this legal theory for the coronavirus pandemic is being challenged in Louisiana by a restaurant seeking a declaratory judgment against underwriters at Lloyd’s of London. The case was brought by Oceana Grill, a well-known French Quarter eatery.
The lawsuit seeks a declaration from the court finding the emergency declaration from the state of Louisiana triggers the civil authority provision of the policy and the coronavirus would be considered a physical loss.
Many business owners and insurance professionals should closely follow this case and speak with their insurance professionals to determine whether they have a viable claim for the inevitable business interruption that will affect so many Americans.
Joshua A. Whisler is the founder of The Whisler Law Firm in Hollywood, Florida, which focuses on property damage and insurance claims, personal injury, workers’ compensation and vaccine injury claims. Contact him at [email protected].