Two schools of thought have emerged on business interruption insurance coverage for coronavirus, either (a) it is a total panacea that will shift the risk of coronavirus revenue losses to insurance carriers or (b) there is no possible coverage for losses caused by coronavirus.
As with most things in life and insurance, the truth lies somewhere in between and will depend on the specific policy at issue and the jurisdiction interpreting the policy. It is important, however, to first set the landscape: no “uniform” business interruption policy exists. Although there is no “uniform” business interruption policy, the Insurance Services Office, Inc. (ISO) provides standard property insurance (and other) forms. While many of those forms are used verbatim by some insurance companies, other insurance companies often modify those forms to either broaden or constrict coverage. Additionally, competitors of ISO promulgate their own forms, and some insurance companies have their own unique, custom forms. Thus, it cannot be overstated that no blanket statements apply universally to what your particular policy will or won’t cover.
Further, even if there were a “uniform” business interruption policy, different states interpret the same insurance policies in dramatically different ways. For example, some courts – but not all – will interpret policies according to the insured’s “reasonable expectations.” Some courts apply exclusions just as broadly as coverage grants; whereas others will read exclusions narrowly and strictly against the insurer. There are myriad other rules of interpretation that courts use and develop for policyholders in their state over time.
It is simply impossible to make blanket statements about how all property insurance policies will be treated across all jurisdictions. Accordingly, you should exercise considerable caution when receiving insurance advice especially if the person providing the advice is unfamiliar with what your particular insurance policy says or how it might be interpreted in your particular state.
To further complicate matters (though potentially advantageous to policyholders), some legislators are actively working to broaden coverage and ensure that policies provide some protection to insureds in these difficult times. For example, a bipartisan group of 18 members of the U.S. House of Representatives has requested that insurers cover business interruption losses caused by COVID-19. Additionally, state lawmakers, in New Jersey for example, have discussed introducing legislation to retroactively expand business interruption coverage; and the State of New York requested a special report from insurers about the potential for coverage under the business interruption policies issued by insurers within the state.
In short, your policy may not be similar to any other policy; your jurisdiction and the interpretation of your insurance policy is not universal; and the landscape for coverage may be broadening by actions of federal and state legislators. With that said, you can and should take some action now even as the landscape remains unclear, including:
- Find the property insurance policy that applies to the current policy period. Policies can change at renewal, and thus, analysis of an older form policy may not include all current declarations, coverages, and endorsements.
- Begin reviewing the policy or have a trusted coverage lawyer or third party review the policy to determine how your particular policy may apply to coronavirus losses.
- Determine the jurisdiction that applies to your particular policy. The applicable law of the state could have a tremendous effect on your policy.
- Begin documenting the lost revenue and increased expenses that you have incurred and begin tracking these amounts. Proof of financial losses can be complex and difficult to quantify. To that end, you should document any and all:
- loss events (e.g., event cancellations, canceled orders, withdrawn requests for products and services, etc.),
- reasons for the loss event (e.g., COVID-19, inability to travel, lack of supplies, etc.),
- identifiable and quantifiable losses (e.g., order totals, job cost estimates, etc.) and
- opportunities and job orders that you did not accept in lieu of the cancelled or lost business.
- Mitigate the losses to the greatest extent possible.
- Timely notify the insurance company of the loss.
For additional information regarding insurance-related matters, please contact Mark Bell, Quynh-Anh Kibler, Wes Scott or your regular Waller contact at .