Loss of Income on Business Insurance Policies Due to the Coronavirus

The COVID-19 coronavirus is challenging Americans and citizens of the world like never before. The United States has not faced such a pandemic in our lifetimes. It’s creating financial difficulties and health issues for millions of people. Congress is working to make things a little better for people, but there are millions of Americans facing unemployment.

One of the questions that we’ve been getting lately is whether or not the financial impact and government-ordered shut down covers the resulting loss of income for businesses.

The short answer is it doesn’t look like it will be covered, but the final decision is up to the insurance carrier that issued the policy. The only way to know for sure is to file a claim with the carrier.

Note that each carrier and even each policy can be different, but most policies follow the Insurance Services Office, Inc. (ISO) standard forms. Many carriers make some modifications to the ISO policies. Please note that ISO forms are copyrighted by them.

Here is a much more detailed explanation as to why loss of income because of COVID-19 will most likely not be covered:

  • There must be a direct physical loss or damage to property. The coronavirus does not actually damage property. It may be present on property and be transferred to a person who is later impacted by the virus, but having the virus on something does not actually damage that property.
  • If it was determined that there was a physical loss, it would have to be caused by a cause of loss that is covered in the policy. A typical example would be a fire. Fire damage is almost always covered in a business property policy. Most commercial property policies will include ISO form CP 01 40, entitled “Exclusion of Loss Due to Virus or Bacteria.” That form applies to all coverages including, but not limited to “business income, extra expense or action of civil authority.” It further goes on to say the policy “will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness, or disease.” Commercial insurance policies were not designed or priced to pay for potential losses due to viruses such as COVID-19.
  • Income Protection Coverage covers the loss of income due to an interruption of business that is a direct result of loss that is covered by the policy. So if a tornado were to cause a loss that results in a loss of income, then that would likely be covered. Because a virus is not a covered cause of loss, then the resulting business income loss isn’t covered either.
  • Many people will ask about the provision in the policy regarding Civil Authority Coverage. This could apply if the action of authorities caused loss of business income. However, this also has some requirements for coverage, including that civil authorities are prohibiting access to the insured premises, physical damage occurs due to a covered peril (or cause of loss). An example of this would be if the government prohibited access to a business because a major wind storm blew down power lines all around the business.

If you are a customer of Curry Agency, you are encouraged to contact us to discuss your policy and situation. Insurance companies are being very accommodating to customers regarding billing and cancellations because they recognize that this is very stressful and difficult time. If you are insured by another agency, contact them to discuss your specifics.

If you would like to discuss your insurance needs, please call us at 317-644-1770.

We wish you health and peace during these challenging times.