Many of us have dealt with business interruption claim issues in past natural disasters like Hurricane Katrina, where there were disputes and, in many instances, litigation surrounding business interruption coverage. These policies have evolved significantly over the last 15 years.
These policies are sold by both licensed and surplus lines commercial insurers. Since there are a wide range of policy languages from insurer to insurer and each policy may have differences, it is important to understand those differences in surplus line products and those sold by licensed insurers. The two are treated and regulated differently by the state insurance regulators.
Regardless of the issuer, all business interruption policies normally require some form of a waiting period of at least 24 hours before any coverage begins. Many policies may have a longer waiting period, so make sure you understand what your policy requires.
These policies would normally require some form of physical damage to the insured property resulting in the property having to shut down. The language in each policy will control if there is coverage for the shutdown of a business due to the coronavirus without any physical damage to the insured structure. Therefore, everyone should review their policy and exclusions and endorsements closely to determine if there is coverage.
In addition, many policies have multiple types of exclusions ranging from flooding, war and terrorism, to nuclear action, and some may even have exclusions for “virus” or “other bacteria.” Again, each policy may differ so make sure you review your policy language. We anticipate significant litigation in the coming weeks, months, and years similar to what has happened following other natural disasters like hurricanes and flooding. In fact, we have already seen some suits filed on this business interruption insurance issue.
Business interruption policies may also provide coverage when the business is shut down due to an Order of Civil Authority. However, these policies may also require physical damage to the structure to trigger coverage and the reason for the shutdown must still be a covered peril. Therefore, if the policy excludes “virus” or “other bacteria,” we recommend that you review your policy for specific guidance to determine what it does cover.
Commercial policies may also offer a remediation benefit (sometimes called decontamination) under which there could be coverage to clean a structure. However, in many instances these coverages are only applicable if the triggering cause/event requiring the remediation/decontamination was a covered peril under the policy language.
Commercial insurers may also offer specific riders/endorsements to add excluded coverages, including coverage for virus or bacteria, back to your policy.
If you haven’t already done so, we urge you to review your policy coverages and seek counsel as needed. This is a complicated and constantly evolving issue, and we will continue to monitor legal and public policy developments for our clients.
» GEORGE DALE served for 32 years as Insurance Commissioner for the State of Mississippi.
» LEE HARRELL worked with the Mississippi Insurance Department as Special Assistant Attorney and General Counsel, then as Deputy Commissioner and Special Counsel.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info