Businesses are being significantly impacted by COVID-19 and Michael Perlmuter, CEO & General Counsel, from Sill shares some information for businesses to consider as they are
Businesses are being significantly impacted by COVID-19 and Michael Perlmuter, CEO & General Counsel, from Sill shares some information for businesses to consider as they are impacted. The business losses resulting from the COVID-19 pandemic may be covered by commercial property insurance and owners/managers should critically review policy clauses to determine the extent business interruption is an insured event under their individual policy.
Furthermore, the New York Department of Financial Services in anticipation of the prospective financial implications caused by coronavirus disruptions, has ordered property and casualty insurers to timely and equitably explain the benefits and protection coverages related to COVID-19 to its policyholders.
Business interruption and determination as to whether a company can successfully file a claim is certainly teed-up in the line of important issues which will bubble to the top in coming weeks. Several possibilities exist for companies to benefit from some form of coverage. In the broadest sense, recovery may be limited by the requirement that in order to successfully make a claim for business loss, there first must be a direct physical loss to an insured property.
Property insurance typically covers a physical loss or damage to property. Although many businesses may not look at losses due to Coronavirus as a “physical” loss, the mere presence of the virus may constitute an insured loss, thus triggering coverage under the policy. In fact, many courts across the United States have recognized that contamination of property by a virus may establish the damage element of an insurance claim. As airspace within a building has been long recognized as real property, the presence of Coronavirus inside of a building, ship, or other structure would constitute damage to property. Some commercial property policies with business interruption coverage contain exclusions for property damage arising from pathogens, bacteria, viruses and other disease-causing agents.
Business interruption coverage is intended to compensate an insured for the income lost during the period of restoration or the time necessary to repair or restore the physical damage to the covered property. Associated coverage, known as Extra Expense coverage is intended to reimburse an insured for additional costs in excess of normal operating expenses that a business incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss.
Businesses also should be aware of potential Contingent Business Interruption (CBI) coverage in their policies. CBI may be present in some commercial property policies, and if included provides protection against revenue related losses. CBI typically covers lost earnings that are the result of a third-party supplier or distributor shutdown whose interruption in turn directly impacts the insured’s ability to produce a product or provide a service.
Most businesses are not as well versed on CBI. Many companies may lose earnings because they incur additional costs and/or are unable to conduct business with companies directly impacted by the Coronavirus outbreak. Businesses should carefully review the provisions contained in their policy’s CBI provisions.
Finally, my advice to business policyholders who have cancelled planned events to have policies reviewed by experts for first part Event Cancellation coverage. But like all of the claims issues involving coronavirus, coverage analyses are not simple nor will they be easily accepted by the insurers.
Consider how policies will be scrutinized upon the cancellation of events, such as those by MLB, NBA, NHL, NCAA, MLS, NASCAR, the PGA and many other sports organizations. Policyholders with Event Cancellation Insurance will be scouring the language to determine what is recoverable, while the insurers will be attempting to minimize their own losses. Insurance companies will be arguing in favor of exclusions or limitations. Meanwhile, the insureds need to be equipped for the battle armed with fortitude and perseverance to staunchly maintain the limitations and exclusions do not apply as broadly as the insurers contend.
Sill is among the leading public insurance claims adjusters in North America. The company has nine decades of experience helping commercial policyholders both understand their specific coverage and then obtain the maximum amount due for their loss. The Business Interruption team at Sill focuses entirely on the special situations which result in business interruption claims. Our team is here to help you understand your coverage and maximize your claim recovery. Contact our team today or for more information regarding your coverage. Here are two article with additional information as well. The first article covers the application of commercial property insurance to COVID-19 claims and the other article covers areas of coverage that are up for case by case interpretation.