Business Interruption Insurance

As a consequence of the recent government travel advisories/restrictions and increasing public fear over contraction of coronavirus, businesses located in areas where human contraction of coronavirus has been concentrated may experience significant disruptions. Business interruption insurance may respond with coverage for these income losses. 

Typically purchased as part of a company’s commercial property insurance policy, business interruption insurance is intended to protect businesses against income losses sustained as a result of disruptions to their operations. Contingent business interruption coverage similarly provides insurance for financial losses resulting from disruptions to a business’s customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier be of a type covered with respect to the business’s own property. 

In many commercial property insurance policies, business interruption coverage is triggered when the policyholder sustains “direct physical loss of or damage to insured property by a covered cause of loss. In the event of a claim for coronavirus-related business interruption, certain insurance carriers may dispute whether this “physical loss” requirement has been met. 

Policy holders should keep in mind, however, that courts across the country have not settled upon a uniform rule for when insured property has suffered a “physical loss.” Courts in a number of jurisdictions have determined that contamination and other incidents that render property uninhabitable or otherwise unfit for its intended use constitutes a “physical loss” sufficient to trigger business interruption coverage. The determination of whether “physical loss” has occurred will therefore continue to require a close examination of the particular facts of each case.