COVID-19 has affected almost everyone and we’ve been getting a lot of questions about related legal issues.  Our hope is to address some of the more common questions we’ve been asked.

Many of our clients own businesses.  Some of those businesses are facing mandatory or recommended temporary closures, or may choose to shut down voluntarily for other reasons.  This will be hard on them and their employees.

We recommend our business clients look at their coverage and determine whether they have business income insurance, which is also often called business interruption insurance. 

So what is business income insurance?  Basically, it is a line of insurance that helps cover lost income when your business has to shut down due to a covered event.  Typical covered causes of loss include events like fires, flooding, or wind damage, but depending on the policy can cover other events.  So how does it work?

Let’s say you own a small business and there’s a flood.  You have to shut down while you repair any damages.  Business income insurance can help pay your lost income while you make repairs.

Will business income insurance cover losses due to COVID-19?  That’s the question.  Because of mandatory shutdowns in New York and elsewhere, there almost certainly will be many claims made against these policies, but whether they will be covered will depend on the terms and conditions of each specific policy and the circumstances surrounding the alleged loss. 

It is early in this process, but the obstacle most companies with this coverage will face when trying to make claims likely will be whether or not COVID-19 caused any direct physical loss.  That will depend on the circumstances.  If you operate a bed & breakfast and it turns out you have a guest with COVID-19 who contaminated the premises, requiring its closure and cleaning, there is probably a reasonable argument that you suffered a physical loss.

If you have a business income policy, one particular provision to review for is an additional coverage typically called interruption by military or civil authority, or sometimes just civil authority.  Sometimes civil authorities may order evacuations or quarantines, which forces businesses to shut down operations. Depending on what your policy contains, your business income insurance can help cover your lost income if something like this happens—and it already is starting to happen.

Another thing to look for is whether there is an endorsement within your business income coverage policy that provides for communicable disease coverage.  It is less common, but it may not require a physical loss, although it may only pertain to specific diseases.

If your business is being affected by COVID-19—and virtually every business is—take a look at your insurance coverage.  If you think you need legal advice about your policy, feel free to contact Tim Lambrecht (tlambrecht@wladislawfirm.com) at 315-445-1700 at our firm. 

We hope everyone stays safe and healthy and that we all get through this together.