Does Your Insurance Cover Business Losses Due to Coronavirus? It’s Complicated.
Update March 2020
As the COVID-19 situation continues to evolve, we’ve received numerous inquiries from business owners regarding business interruption insurance and whether it covers losses tied to the pandemic.
Here’s what we know as of today:
Business interruption legislation
New Jersey legislators introduced a bill that would have required insurers to retroactively cover business income losses related to COVID-19 shutdowns. Although it passed through committee, it was later tabled before the Assembly adjourned.
Other states are exploring similar measures, though none have yet been enacted.
At the federal level, Treasury Secretary Steven Mnuchin has described a proposed $1 trillion stimulus package aimed at compensating small businesses for “business interruption.” Details are still emerging, and we’re continuing to monitor updates closely.
60-day grace period on insurance premiums
California Insurance Commissioner Ricardo Lara has requested that all insurance companies grant policyholders at least a 60-day grace period to pay premiums. This measure is designed to help prevent policy cancellations for nonpayment during this public health emergency.
We know these are challenging times for our clients and community. Please know that we stand with you and are actively monitoring federal and state efforts that may provide relief to business owners.
Understanding your coverage
As the coronavirus outbreak began to impact operations worldwide, many business owners asked whether their business interruption insurance would cover pandemic-related losses.
In most cases, the answer is no.
Business interruption coverage—commonly included in Business Owners Policies (BOPs) or Commercial Property policies—is designed to replace income lost due to interruptions caused by a covered physical loss.
Pandemic-related shutdowns, however, stem from non-physical causes such as government-ordered closures or public health precautions. These do not generally meet the “direct physical damage” requirement that triggers coverage.
Why coverage may be denied
The insurance industry relies on historical data to model and price risks. Because pandemics are rare and unpredictable, insurers have traditionally excluded them from coverage. Including pandemic protection would make premiums prohibitively high for most businesses.
For now, the best course of action is to review your policy and follow the CDC’s guidance for workplace safety—encouraging sick employees to stay home, maintaining hygiene protocols, and performing regular cleaning.
Limited exceptions
There are a few situations where coverage could potentially apply:
Property rendered unusable: Some courts have found that a building made uninhabitable could qualify as having suffered “physical loss,” though this interpretation varies.
Civil authority coverage: Certain policies cover lost income if a government order prevents access to your premises due to nearby property damage. However, orders issued purely for virus prevention typically do not qualify.
Food contamination or communicable disease endorsements: Some policies include these specialized coverages, which may provide limited protection if contamination is confirmed.
Workers’ compensation: COVID-19-related claims are evaluated case-by-case, depending on whether exposure occurred in the course of employment.
Reporting claims
If you believe you may have a claim, we’re here to help you navigate the process and coordinate with your insurer.
Coverage questions related to COVID-19 will depend on your specific policy language and circumstances, so please document all losses carefully.
This article is intended for general informational purposes only and should not be taken as legal advice. Each insurance policy is unique and subject to its own terms and conditions.
