April 17, 2020

Business disruptions due to the Coronavirus continue to spread throughout the United States. Growing numbers of companies are facing disruptions such as closed plants, closed schools, employees stuck at home, and undelivered goods and supplies.  $1.5 trillion of global economic activity could be lost as the coronavirus pandemic continues to spread.

Commercial Business Policies include Business Income coverage to cover lost income following events that cause physical damage to insured property such as fire or windstorm.  Unfortunately, quarantines and travel bans generally do not cause the physical damage to businesses necessary to trigger Business Income coverage. Additionally, insurers added language to exclude communicable diseases as a trigger for coverage- mainly due to the SARS scare in the early 2000s- excluding loss or damage caused by or resulting from any virus that induces or can induce physical distress, illness or disease. Currently there are no markets that will provide coverage resulting from the COVID-19 viral pandemic.

The Wall Street Journal has reported that lost revenue from the coronavirus pandemic will ultimately be up to the courts to decide. Many Louisiana homeowners resorted to the courts in the aftermath of Hurricane Katrina in 2005 when insurers denied claims under a standard homeowner’s flood exclusion.


Business Income and Property insurance coverages require physical property damage for coverage to be triggered.  The courts in many jurisdictions have held that contamination and other incidents that render property uninhabitable or otherwise unfit for intended use could constitute a physical property damage loss sufficient to trigger coverage.  If this is found to be correct, Civil Authority and Business Income from Dependent Properties could be applicable insurance coverages available without physical damage to your business premises:

CIVIL AUTHORITY: Civil Authority is an additional coverage that pays for loss of income caused by action of a civil authority that prohibits access to your business taken in response to dangerous physical conditions resulting from damage caused by a covered loss.  Most Civil Authority coverages extend for up to four weeks after a 72-hour waiting period.

BUSINESS INCOME FROM DEPENDENT PROPERTIES: Dependent Property Business Income coverage pays for the loss of income caused by direct physical loss or damage to property owned or operated by others whom your business depends on to:

  • Deliver materials or services to you or to others for your account
  • Accept your products or services
  • Manufacture products for delivery to your customers under contract of sale
  • Attract customers to your business

Most commercial policies provide limited coverage between $5,000 – $250,000 for Business Income from Dependent Properties with a 72-Hour waiting period.

Businesses and entities that interact with the public- such as restaurants, retail stores, schools, and supermarkets- may see litigation if customers believe they can link their illnesses with a business’ employee illness.  However, these potential plaintiffs will need to prove that your business created the causation for their illness.  Commercial General Liability offers Bodily Injury coverage to pay those sums that your business becomes legally obligated to pay as damages because of applicable “bodily injury.” Entities that follow CDC guidance or implement pandemic policies limiting exposure will have additional defenses.

BODILY INJURY LIABILITY: Bodily Injury means bodily injury, sickness or disease sustained by a person, including resulting death.  Many policies also include resulting mental anguish, mental injury, or shock.

WORKERS COMP: For employees to be covered for workers comp bodily injury by disease, it must be caused or aggravated by the conditions of their employment. Employers should consult state workers compensation laws for additional clarification.


Below are recommended articles to learn more about how insurance is handling the Coronavirus pandemic along with useful information from the CDC:

  • Insurance Business Magazine: Policy wording critical as businesses assess coronavirus claims
  • The Wall Street Journal: U.S. Businesses Gear Up for Legal Disputes With Insurers Over Coronavirus Claims
  • The New York Times: Coronavirus Will Cost Businesses Billions. Insurance May Not Help.
  • Butzel Long: Business Interruption Due to the Coronavirus: Is it Covered by Insurance?
  • CDC: Coronavirus Disease 2019 (COVID-19) Interim Guidance for Business & Employers
  • CDC: Coronavirus Disease 2019 (COVID-19) Print Resources