Understanding Business Interruption Coverage

All insurance is complicated, and it’s always wise to have expert help in navigating it. This is particularly true in the case of business interruption insurance.

Whether you’re looking to:
• Obtain coverage,
• Renew existing coverage, or
• File a claim under existing coverage,

Your first step should be to approach one of the professionals at South Risk Management to advise you on how to proceed.

What is business interruption insurance?

Business depends on continuity – on having the conditions that lead to success remain something you can depend on. But life is unpredictable; the unexpected can arise and interrupt your cash flow or even cause your operations to come to a sudden halt. Even a brief interruption in routine operations can be devastating to your organization.

That’s where business interruption insurance comes in, replacing the income you would have earned during a closure period if it had not occurred.

This kind of insurance can protect against a variety of interruptions, including natural disasters and other catastrophic occurrences.

But as we’ve discovered during the current coronavirus pandemic, interruptions can arise from circumstances not anticipated by your coverage.

The current uncertainty

Right now, most business interruption policies are unlikely to provide coverage for COVID-19 interruptions unless specific wording is present in the policy, or unless state or federal legislation mandates it.

As we related in a previous post, there are a number of lawsuits pending, and a huge policy debate occurring in Washington and in state capitals. Where the law will end up is far from clear right now, and the issues could take months or even years to be sorted out.

What’s the issue?

Generally speaking, business interruption insurance only covers losses caused by direct physical loss, damage or destruction to insured property. That damage must result from a covered cause of loss.

Obviously, much of the losses incurred during the pandemic result from shutdowns having nothing to do with a physical loss to insured property. That has led to the current controversy.

To be covered right now and in the future, you have to have the right policy, and it has to anticipate the right sort of interruption. To make sure you’re covered, please consult with one of the expert professionals at South Risk Management.