Updated 03/18/2020  9:06 AM PST 

The recent outbreak of Coronavirus (or COVID-19) continues to spread around the world at an alarming rate, changing life as we know it. Cities are closing down schools, businesses, public events, and recommending self-quarantine to contain the virus via emergency shutdowns and shelter-ins.

So what does this mean for business owners? Businesses small and large are seeing mandated closures or disruptions in operations causing loss of revenue. Is there coverage for losses due to Coronavirus? Unfortunately,  insurance policies have clear exclusions for bacteria and virus outbreaks leaving most businesses without insurance coverage.  

Business Income Coverage

First, business owners need to know the difference between direct property loss and business income claims.  Business income coverage covers the loss of a company’s income as a result of the physical property that becomes damaged during a covered event. Nonetheless, what is often found across insurance plans is that instances such as acts of war, nuclear hazards, and extreme weather are not covered. Several types of insurance fall under business income insurance coverage, with their particular restrictions and limitations. Some examples include the following:

Communicable Disease Exclusion

Ever since the SARS or Severe Acute Respiratory Syndrome outbreak occurred back in 2003, communicable diseases were often excluded from many insurance policies. Such losses must be specifically mentioned and added separately, in addition to the standard business income coverage. The additional rider must be pre-negotiated and accepted beforehand, and there is a cap on how much recovery amounts businesses can get back. However, this endorsement often excludes coverage for a virus like COVID-19. 

Business Interruption insurance

Even when the government requires a business to shut down (Civil Authority), business disruption insurance not cover all losses. Many factors have to be met, damage to business property or customer property. An example is if a restaurant is required to shut down or modify operations to food deliveries and pick-up orders. Their business will lose out on valuable income, but it must be proven that property was damaged due to the Coronavirus to have coverage. This would be much harder to prove than fire damage. 

Contingent Business Interruption Coverage

Contingent business interruption is also known as supply chain insurance. Such an interruption comprises of extra expenses and revenue losses due to suppliers and/or customers. For example, suppliers shutting down their main facilities or having public areas closed down can interrupt businesses from proceeding as usual. The insurance policy must specifically state infectious diseases that result in a loss of business under their interruption coverage. Another aspect that can be covered would be losses in revenue due to being close to popular attractions and stores that have closed down. For instance, having the MLB shut down can cause neighboring restaurants to lose out on profitable business, since a lack of customers would be in the vicinity. To be covered, suppliers must have faced property damage from Coronavirus. These losses are usually only covered when its specified suppliers listed in your insurance plan. Lastly, bacteria and viruses does not apply in this case, unless explicitly noted

Event Cancellation Insurance

The Coronavirus is highly contagious, and a myriad of large-scale events have suddenly canceled in the hopes of containing it. Examples of canceled events include Broadway shows, NBA games, conventions, and live concerts all over the nation. The upcoming Summer Olympics are also subject to be canceled. Event cancellation insurance can cover expenses and financial losses as a result of cancellations, but most types have excluded the Coronavirus as being covered. 

Workers Compensation

Currently, the prevalence of the Coronavirus has led to an alarming international public health emergency. Thousands of people have been affected, unable to work, and/or laid off from their jobs. Workers compensation covers employees who become injured or ill while on the job. To file a claim, be sure to keep track of and record how you were exposed, when, and where. A direct connection needs to be established and proven. Health care workers, for instance, may not get covered unless it is proven that they got infected while on the job.

Our Advice

Almost all small and medium-sized businesses will go without insurance coverage for Coronavirus shutdowns. Local and federal governments are aware of this and are working to roll out programs to help. Here are a few tips to help your business navigate the next several weeks. 

Premium Rating: Contact your agent immediately and ask how your policy premiums are determined. Most insurance policies are rated off employee payroll and sales. If your business is shut down for 30-days, and you have projected 12-months of sales you may be able to rerate given the unique circumstances. If you have you have had to lay off employees you can give an updated employee count to re-calculate premium also. Both of these changes could result in a sizeable reduction in premiums.

Delay Premium Payments: Insurance billing departments may be able to delay any premium payments for the next 30-60 days if you have a good history of timely payments. 

SBA Assistance: the Small Business Administration has received funding to help during this period of inactivity. https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

To learn more about all of the varying types of business income insurance coverage or to discuss your options during the shutdown, contact us at SmartInsured  844-881-6629 or email your policy docs to support@smartinsured.com Our licensed team is here to answer any questions you have.