COVID-19 and Why Business Interruption Insurance May (or May Not) be the Answer19-Mar-20
By McLennan Ross Corporate & Tax, and Insurance Teams
Much about COVID-19 remains uncertain. What is certain is that the outbreak is disrupting business on global, national, and local levels, which is largely due to shutdowns, reduced transportation, travel restrictions, and the effects of social distancing measures. Many businesses, especially those relating to tourism, hospitality, manufacturing, and transportation, will experience significant business losses. As the government continues to implement further restrictions and health organizations continue to advise individuals to stay home, it is likely that most industries will suffer business losses.
Many Canadians are now turning to their insurers for answers. One area of coverage we expect to generate significant discussion is business interruption coverage. Below are some considerations to keep in mind:
- With respect to a property policy, business interruption coverage normally applies if the original loss is caused by an insured peril. There are several important restrictions on business interruption coverage and, like other types of insurance, the specific policy language must be reviewed. An important consideration to keep in mind is that most business interruption policies will provide coverage only when physical loss or damage has been caused to the insured’s premises or property used in the operation of the business.
- Some package policies from insurers may have limited “outbreak expense coverage”, but this will likely be for a nominal amount and only apply with respect to ‘confirmed’ not ‘suspected’ exposure.
- Specialty coverage for disruption of business due to a pandemic does exist. But the number of companies that have this type of coverage is limited being that the coverage has always been expensive and limited in scope.
If businesses have questions about their coverage or intend on bringing an insurance claim, they should:
- Keep complete accounting and financial documentation;
- Review their policy;
- Consult with their insurance broker;
- Reach out to legal counsel when necessary.