March 31, 2020

The Possibility of Making an Insurance Claim due to COVID-19

We have had many clients ask us about filing a claim with their insurance company for such matters as “business interruption” (BI) resulting from this pandemic. Coverage for BI is typically provided in combination with property insurance and is triggered when the business of the insured is interrupted by physical damage to the property that is insured.

If you have such coverage, typically insurance recovery would be based on the revenue lost as compared to some (historic) metric established by the carrier. This would mean you will need to have actually incurred this lost revenue. Simply anticipating that you will lose revenue is not enough. So typically, like any insurance claim, the claim application would wait until you actually have incurred the loss.

However, it is likely that short of any intervention by the government (either legislative or judicial), the mere concern over contamination at your place of business as a result of COVID-19 may not be enough. Unfortunately, policies covering this type of insurance specifically have “exclusions for loss due to virus or bacteria”. This is not new and has been with the industry for decades.

What typically might be covered could include losses resulting from:

Damage to the insured property;
Damage to the property of a customer or supplier or a supplier’s supplier; or
Government action such as evacuation orders.

And so the situations brought about by COVID-19 will be raising question as to business interruption and even “physical damage” coverages under property policies. So for example, given the above bullets listed as possible areas of coverage, should claims for the following be honored by your insurance carrier:

Costs of sanitizing insured property?
Costs of evacuating the insured property?
Lost income resulting from the closure of the property during sanitization?
Lost income resulting from the loss of customers due to identification of the virus at the insured property?
BI resulting from business closure or curtailment due to requirements from civil authorities?
BI due to the closure of a facility of a key customer or supplier?

However, if such claims are to be loosely defined or the government is to intervene in the expansion of allowable claims without providing any financial assistance to the insurance industry, might it put some or most of the insurance carriers out of business?

We will have to wait and see to properly address these questions.

But here are some suggestions for what you can do now:

Get a copy of your property & casualty insurance policy and review it with legal counsel.
Look for specific wording covering the cause of loss, exclusions and limitations and possible coverage that may be specific to your industries. Healthcare and hospitality may have coverage for events that align with this pandemic.
There are deadlines for reporting, so call your insurance provider or broker soon. I understand that many insurance reps are helping our clients to make claims now. So if any such claims are to be considered, yours will be the first on the list. Be sure to document the call and the claim.
Don’t be discouraged if you get a denial of your claim. It may be likely at this point, but as things change, you might be thankful you filed your claim early.
And you will need to document your loss of revenue along with the expenses you may have saved. This is something Marcum can help you with.
Do all you can to mitigate your losses. This not only can help to further support your claim, it will help if no insurance reimbursement is to be had.