The Covid-19 coronavirus is creating unprecedented disruption in businesses throughout Atlanta and across the Country. At least twenty states and many major metropolitan cities have closed all bars and restaurants. The Mayor of Atlanta has advised avoiding all gatherings of ten people or more. In these times of uncertainty, many business owners are worried about disruption to their businesses and loss of income resulting from school closures, people choosing to work from home, supply chain disruptions, and quarantines, whether self-imposed or government ordered.
Many of our clients are asking whether their existing insurance policies provide any coverage in the event of such disruption, particularly where their policy, while written in English, is confusing and filled with industry jargon that is hard to decipher. Most businesses have a commercial property insurance policy. Often, such policies contain business interruption coverage to protect businesses against income losses sustained as a result of disruptions to their operations. Contingent business interruption coverage similarly provides insurance for financial losses resulting from disruptions to a business’s customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier be of a type covered with respect to the business’s own property.
The typical commercial property policy requires damage to the policyholder’s property or damage to the property of a customer or supplier (or a supplier’s supplier) to “trigger” the coverage. Without property damage, the business interruption losses may not be triggered, meaning the insured business may find itself without coverage for lost income due to the disruption.
The Covid-19 coronavirus may not cause permanent structural damage to property, but reportedly can be transmitted through the air and through touching infected circumstances. Whether contamination by a virus can be construed as “property damage” is a question the courts have not yet answered. Under similar circumstances, courts have found that the presence of harmful substances such as ammonia and asbestos at or on property can constitute “property damage” that triggers coverage. The courts concluded in those cases that property can sustain physical damage without experiencing structural alteration. The reasoning from these cases gives policy holders a strong argument that contamination of their property triggers business interruption coverage. Whether a business was closed because of actual property damage or as a purely prophylactic measure to prevent the spread of the disease will be a question that must be closely examined when evaluating coverage.
The insurance policy must be closely examined, as many property insurance policies contain broad exclusions for damages caused by biological agents. Others specifically provide coverage for damages caused by disease, or only partially exclude such damages. Still others provide coverage for damages caused by disease, but provide sub-limits that effectively limit available coverage to certain dollar maximums.
Some businesses may have purchased specialized insurance policies or extensions of coverage added to their standard policies—including those sold to policyholders in the hospitality and health care industries—expressly providing insurance coverage for losses caused by “communicable or infectious diseases” without requiring physical damage to insured property. Your policy may contain “communicable or infectious diseases” coverage.
In addition, many commercial property insurance policies provide coverage for business income losses sustained when a “civil authority” prohibits or impairs access to the policyholder’s premises. Depending upon its specific wording, a policy’s “civil authority” coverage may or may not require that the access restriction result from “physical loss” by a covered cause of loss and, if so, often does not require that “physical loss” occur to the policyholder’s own property. Accordingly, in the event that a federal, state, or local governmental authority limits access to or from areas where active transmission of an infectious disease has been identified, “civil authority” coverage may respond with insurance for the attendant income losses of affected businesses.
We encourage all businesses who have suffered business disruption because of the virus to have their policy reviewed by qualified counsel with experience advising policy holders to evaluate whether coverage is available to help get them through these difficult times.
By Keith Hasson
The author is managing partner of the Hasson Law Group, LLP, an Atlanta based firm that assists businesses in making claims under their insurance policies, provides advice with respect to coverage, and represents policy holders in disputes with their insurance carriers. The firm also represents businesses and their owners in contract and tort disputes. Please contact the Firm if you need help evaluating coverage under your property insurance, commercial general liability, errors and omissions, director and officer, all risk, or specialty policy, or if you need advice about how to track losses, mitigate damages, notify your insurance company of a potential claim, or navigate the claims process. Learn more at www.hassonlawgroup.com.