Making the Case for Business Interruption Coverage: Coronavirus is a Direct Physical Loss

Due to the stay-at-home orders designed to combat the spread of COVID-19, many businesses are struggling with loss of income. Business owners should look to their insurance companies for relief under the business interruption component of their commercial business insurance policies.

Business interruption coverage is designed to replace income that is lost when business is halted for some reason. However, coverage often hinges on whether physical loss or damage has occurred. This requirement can be a hurdle, so it is critical that you have an attorney to assist in filing your initial claim to ensure it is written carefully and broadly to capture all potential coverages.

Most courts, especially in Indiana1, interpret policy language in favor of the insured. This allows insureds to make creative arguments that the physical loss or damage requirement has been met. For instance, actual contamination of a property by the coronavirus is a physical occurrence.  Although the virus is not visible to the naked eye, it is still a physical, tangible thing. The coronavirus can also cause physical damage by rendering businesses inaccessible. These and many other arguments can and will be made for coverage, and determined by courts and legislation over the coming months. However, coverage for such losses depends largely on the specific language of your policy, and the scope of how and when such claims are formally written and communicated.

The unprecedented nature of the current situation – not to mention the inherent intricacies of commercial business insurance policies – illustrates the value of consulting with an experienced attorney to review your insurance policies and ensure your business is appropriately covered.

Please contact your KDDK attorney or any member of the KDDK insurance law team for additional information and individualized guidance on this or any related matter.

**Article Co-authored by Mike Schopmeyer

1American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996)

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