What will ‘business interruption’ insurance cover amid a pandemic?
COVID-19 has changed the world in ways that we are just beginning to understand, from our daily lives to the long-term prospects of the world’s economy.
The insurance industry is no exception.
One of the biggest issues being argued right now in courtrooms and governmental bodies across the United States is whether holders of business interruption insurance policies are covered for the type of losses that the coronavirus has inflicted.
First, look at your policy
Are you covered for this situation? That depends. You will need to study your own policy to be sure. Some policies specifically exempt losses caused by a virus or bacteria, limiting coverage to losses caused by actual, physical damage to a business. Others do not.
In the unprecedented situation caused by the coronavirus, how broadly “business interruption” is interpreted is a question that can cost billions. It’s an existential issue for businesses that have been forced to close for months, and for the insurance companies.
Moving and shaking in corridors of power
In the corridors of power in Washington and state capitals, the battle has just begun, and the amount being spent on lawyers and lobbyists reflects the size of the issue. Some things that have happened recently:
- A group of celebrity chefs led by Wolfgang Puck recently called President Trump to argue their position that their insurance companies should have to pay up for their losses. Days later, Trump stunned insurance executives by saying at the daily White House coronavirus briefing that he thought insurers should pay business interruption insurance claims if the policies did not include a specific pandemic exclusion.
- Advocates for the insurance industry have argued that “business interruption” policies never were intended to cover contagions. Even if they had been, the estimated claims just from small businesses during the coronavirus pandemic could total more than $430 billion a month, threatening to create a “solvency event” for the industry, according to the head of the American Property Casualty Insurance Association.
- With dozens of trade group allies, insurance industry lobbyists have called for a government assistance program to deliver aid directly to businesses, including through a federal fund modeled in some ways on the aid that was provided after the attacks of Sept. 11, 2001.
How will it shake out?
How will this all shake out? Who will pay for the losses suffered by businesses forced to close by the pandemic? The businesses themselves? Their insurers? The government – which is to say, taxpayers now and into the future?
One thing that seems certain is that policies in the future will be written to make the issues clearer – with exemptions plainly spelled out, and the additional cost of being covered for a pandemic just as plainly stated.
In the meantime, if you have questions about your insurance, what it covers and what you need it to cover, contact one of our professional brokers here at South Risk Management. We’ll be glad to help you find answers.