During a brief shutdown, business interruption insurance (BII) is one kind of coverage that can help a company rebuild lost income and running expenditures. Still, coverage for COVID-19 closures mostly relies on the particular provisions of the program and current state laws.
Standard Policy Terms and Physical Damage Requirements
To start coverage, most conventional business interruption insurance calls for a "direct physical loss or damage" to insured property. This usually refers to actual damage resulting from events including storms, fires, or other covered hazards. Insurers have claimed that closures brought on by COVID-19 do not satisfy this criterion as the virus does not physically damage in the conventional sense. Generally speaking, courts have agreed on this point of view, refuting arguments that COVID-19 closures fit under normal BII policies as bodily damage. Nonetheless, some companies have filed legal challenges claiming that COVID-19 pollution qualifies as "damage," which would affect the reaction depending on jurisdiction.
Exclusion of Viruses from Business Interruption Policies
Many business interruption insurance, starting with the 2003 SARS epidemic, have excluded communicative diseases and viruses. Often inserted to reduce insurance risk exposure, these exclusions clearly forbid coverage for closures brought on by viral infections. Therefore, even in cases when a policy does not call for physical damage, a virus exclusion could stop authorized claims for COVID-19. Some more recent policies offer or reject coverage depending on the presence of virus-related exclusions, especially referring to pandemic-related circumstances.
Particular Policies with Pandemic Endorsements
A few companies have developed policies, including pandemic or communicative disease endorsements, and therefore, they offer limited coverage for events like COVID-19. These endorsements are rare and more widespread in sectors like hotel and healthcare, with great potential for business disturbance. Should a company have one of these sponsorships, it could be reimbursed for COVID-19 closure-related damages. Usually more expensive, these endorsements are less common in regular plans.
Legal and Regulatory Advances
The great impact of COVID-19 has led certain governments and legislative bodies to either propose or review policies requiring coverage for pandemic-related losses under BII. Although some jurisdictions tried to pass legislation covering COVID-19 retroactively, these initiatives have mainly encountered legal hurdles since retroactive amendments affect current insurance contracts. Furthermore, influencing future insurance policy language and pandemic coverage possibilities could involve continuous litigation in some jurisdictions.
Conclusion
Although most ordinary Business Interruption Insurance plans do not cover COVID-19 closures, policies with particular pandemic endorsements do exist. Knowing policy terms and viral exclusions and keeping current on legal changes will assist companies in negotiating their coverage choices for interruptions linked to pandemics.