For those whose companies experienced severe interruption, whether voluntarily or due to state mandates, questions quickly arose about whether their business interruption insurance coverage would step up to provide relief.
Unfortunately, most business owners ended up disappointed as they discovered how this type of coverage works. In today’s article, we will take a look at what type of interruptions are typically covered, and how to possibly be better prepared with appropriate coverage for the future.
If you own a business, you probably are familiar with commercial insurance. There are optional coverages available to choose from depending on the types of perils your specific business faces. Your agent/broker has likely discussed how to customize your commercial policy.
One type of coverage available to business owners is comprehensive multi-peril commercial coverage. Business interruption insurance is one of the options you have to choose from within this type of policy.
So, how exactly does business interruption insurance work?
Your policy only kicks if your business sustains physical damage that is caused by a covered peril. So if your policy covers water damage, theft, fire, vandalism, and similar perils, the insurance will cover loss of income and/or rental costs while your place of business is being restored.
Most policies, however, have exclusions for losses due to contamination caused by viruses and bacteria. These exclusions stemmed from the SARS outbreak in 2003, after which most insurance providers made a standard exclusion for viral pandemics, requiring evidence of physical damage when a claim is made.
Some insurance companies may plan to offer business interruption insurance that will include optional coverage for pandemics such as Covid-19.
However, you cannot expect that coverage to protect you from our current situation. If you are worried about the possibility of facing similar interruptions in the future due to another pandemic, you will want to be watching for a provider who offers this type of coverage.
There have been many lawsuits across the country involving businesses and their insurance providers concerning business interruption. In the vast majority of cases, the insurance provider comes out on top, thanks to the exclusions in the wording of the policies.
There is no doubt that 2020 was an exponentially tough year for insurance providers as well as business owners.
Between the California wildfires and the Coronavirus, countless businesses and homeowners were affected. This, of course, puts a strain on the insurance companies as they struggle to pay out what is due without going broke themselves. This is where it is important for you, as a customer, to know the integrity of your provider.
If you have questions about the topics we discussed today, give me a call. I’d love to assist you as you seek to become more informed about these issues.