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Small businesses in the United States face risks today they could have never anticipated. Forced closings, customer and employee illness, reduced income and other issues associated with the Coronavirus outbreak present unique challenges, especially in New York, New Jersey and other heavily impacted states.
Governments are taking steps to support businesses. These include the Cares Act, Small Business Administration (SBA) loan programs, tax credits and expansion of unemployment benefits. Unfortunately, there have been delays in getting cash to people who need it.
Add to this the concerns owners have about COVID-19 related claims against their businesses. They’re looking into whether their insurance coverage could help them make it through the Coronavirus pandemic. Many are also checking what their current policy covers and if it’s adequate.
Here are some coverages that could protect small businesses policyholders during the COVID-19 crisis. Check with your insurance agent to learn about your specific insurance coverage and the types of protection available to you.
Business commercial property insurance
Some property insurance policies offer coverage that could protect businesses against COVID-19 claims.
Business interruption insurance
Business interruption insurance is usually purchased as part of a commercial property insurance policy. It protects against business income losses caused by a disruption to business operations because customers can’t access the business or its supply chain is interrupted. Most insurers require that the underlying cause of the disruption and loss of income be related to the covered business property.
Business interruption coverage is typically triggered when the insured property sustains direct physical loss, or damage from a covered loss, such as a hurricane, fire or theft — not a virus.
The issue: Insurers dispute whether a coronavirus-related business interruption meets the physical loss or damage to the covered property conditions in their policies.
The complication: Courts across the United States have not agreed on a single rule as to when an insured property has suffered damage or a physical loss. Some judges have determined that contamination and other similar incidents that make it impossible to use a business property can be interpreted as a physical loss that’s sufficient to trigger business interruption coverage.
This has forced insurers to review every business interruption claim on a case basis and not dismiss them outright. That makes it more likely they will take Coronavirus claims seriously.
Communicable and infectious disease coverage
Certain businesses, such as hospitality and healthcare operations, may have specialized insurance coverage through an extension to their business property insurance policies. It covers losses caused by communicable or infectious diseases and don’t require property damage to make a claim. Check with your insurance agent to find out whether you’re covered, or if it makes sense to get coverage.
Civil authority coverage
Some business property policies provide coverage for business income losses caused by a civil authority that prevents or limits access to a covered property. This typically includes things like utility or road work. Depending on how a policy is worded, the civil authority coverage may not require that the restricted access result from a physical reason.
If that’s the case, when a government authority limits access to a covered business because of the risk of infection, civil authority insurance may cover related business income losses.
Political risk insurance
If political risk insurance is part of your business owner’s policy, you maybe able to make coronavirus related claims. It typically covers business interruption losses if you’re doing business in a foreign country and that country’s government takes an action that leads to business losses. In this case, forced business closures because of the pandemic would have to be mandated by a foreign government entity. If you do business in multiple countries, this coverage could apply to you. Your agent will know for sure.
Note: Business owners might want to add business interruption protection or other coverage to their business property insurance policies after a coronavirus-related loss occurs. Unfortunately, you cannot buy coverage for a pre-existing loss. Insurance carriers require you to sign a release that states you have no known losses before they issue a policy or addendum. You can only add this coverage for future losses.
Commercial General Liability Insurance
Coronavirus is forcing businesses, especially those in hospitality industries, to deal with a unique risk. They could face claims by patrons infected by coronavirus because owners did not take reasonable care in guarding against — or warning them about — the risk of exposure. Commercial general liability (CGL) policies protect businesses against third-party bodily injury claims. Depending on your policy, COVID-19 exposure may be covered.
Workers’ Compensation Insurance
Businesses may face bodily injury claims from employees exposed to coronavirus in the workplace. In most states, employees are entitled to workers’ compensation benefits for diseases related to their work. They‘re not covered for ordinary diseases the general public is exposed to, such as Coronavirus.
If an employee is able to link their illness directly to the workplace, they may be able to make a workers’ comp claim. Even though coronavirus is transmitted from human to human, which makes it an ordinary disease, coronavirus acquired in a laboratory or medical office could qualify for workers’ comp. This will become an issue as employees make workers’ compensation claims for COVID-19.
Errors and Omissions Coverage
Most health care providers purchase errors and omissions (E&O) insurance. It covers damages that health care providers are required to pay for bodily injury caused by providing — or failing to provide — medical services to patients. This is a new area, but E&O policies may cover coronavirus-related bodily injury claims made by patients.
Directors and Officers Insurance
Directors and officers (D&O) insurance covers costs related to shareholder lawsuits against directors and officers of companies. In this case, they may be subject to lawsuits because of the actions they took — or did not take — in response to coronavirus that may have contributed to company financial losses. If your business could face this type of lawsuit, your insurance agent can advise you on coverage.
Travel and special event coverage
Many businesses had to cancel or change employee travel plans because of Coronavirus. Whether you’re covered depends on the policy, but most don’t cover communicable diseases.
Certain special event policies will reimburse costs related to postponed or cancelled events. Disease-related issues are typically covered. Check with your insurance agent to find out for sure.
Whether your business insurance covers claims associated with the COVID-19 pandemic depends on your carrier, policy, the specific language in it and how courts rule on interpreting that language.
The consensus of many legal and insurance experts is that the typical business owner‘s policy does NOT cover claims related to viral pandemics because the language in them is carefully worded.
The issue became more complicated when President Donald Trump and other lawmakers weighed-in and suggested that insurance companies take a broader view of covering coronavirus claims.
The insurance industry came out against these recommendations because policies were not designed or priced to cover something like the COVID-19 pandemic. Insurance companies take the position that covering perils they never accounted for could put them out of business.
This is a fast changing area. It’s important for small business owners to regularly connect with their insurance agents to stay up-to-date.