With the increasing number of confirmed cases of COVID-19 and the corresponding effects on nearly all business sectors, it becomes increasingly important for business owners to review their commercial property and liability insurance policies. It is specifically important to review the applicability of business interruption insurance.
“Business interruption,” “business income” or “business indemnity” insurance generally refers to a policy or provision whereby the insurer agrees to compensate the insured for a loss of income resulting from an interruption of business caused by a covered event or peril such as a fire or natural disaster.
Coverage typically applies to loss of income caused by physical damage to covered property and lasts during the business interruption period, which may be defined as the date the covered event occurred until the date the damaged property is repaired and returned to the same condition that existed prior to the covered event.
Many business interruption insurance policies also offer extra coverage pursuant to a “civil authority” clause, which protects businesses disrupted by an order or action of a governmental agency that prevents access to covered property.
That said, it is important to understand that the scope and duration of coverage, whether via a business interruption provision or civil authority clause, will depend on the specific language of the policy and the timing and nature of the loss.
Many policies contain exclusions or specifically-defined terms that may limit coverage depending on the specific cause of loss. Other policies may include additional endorsements or optional coverages that could apply to certain types of loss.