We wanted to give an update on how insurance may play a part in COVID-19, and answer some common questions about Business Interruption. Yes, that pert of your policy that says if your business is closed, this protects the lost income.
There has been much activity regarding insurance policies and if COVID-19 will be covered by Business Interruption coverage. Business Interruption coverage is generally included in most Business Owners Policies, and provides coverage for lost revenue when a covered event closes a business (temporarily).
For insurance companies and insurance agencies, the lack of coverage for virus pandemics may seem apparent. The industry long ago learned to insulate itself from the financial fall-out pandemic as an existential threat. Coverage is triggered by a “Physical loss”, which pandemics are not. Language also excludes losses arising from “bacteria, viruses and fungi”.
But contracts be damned, the government would like to mandate the coverage be applied (which we support, if there’s a government backstop). Both the federal government, and the State of Massachusetts (among others), have begun drafting bills/posturing for legal support, making it possible that coverage will be provided.
An interesting caveat: here in Massachusetts, the Division of Insurance could backstop the coverage and reimburse insurance carriers for BI claims paid under this proposed bill. This is likely a needed stipulation to get past the courts (unreasonable seizure of property), but the actual dollars would probably require federal support, as losses will be enormous, and individual states can’t have the financial resources to fund such an undertaking.
We know that the PPP program is a mess; while some have already received money, many have not, and the technical rules out of the SBA seem to change daily. We feel utilizing an industry (insurance) skilled at quantifying & adjusting Business Interruption losses is a better idea than the Fed trying their hand at playing claims adjuster.
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