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Business Insurance & COVID-19

Business Insurance & COVID-19

We've been receiving questions from our insureds in regards to whether or not there is coverage for COVID-19 related shut downs, etc.

With that in mind, I wanted to take some time to focus on this, specifically if you own a restaurant or any other business that has been forced to shut down or modify offerings to the public.


Business Income coverage:
Whether it be a full shutdown of business, a partial suspension of operations or an alteration in business operations that remain open, Business Income coverage must be due to a suspension caused by direct physical loss of or damage to covered property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss. Extra Expense coverage also requires the same coverage triggers. In general, a quarantine of any size, or brought about by a governmental action without a Covered Cause of Loss, would likely not trigger Business Income or Extra Expense coverages under our policies.

Civil Authority coverage:
Civil Authority additional coverage pays for actual loss of Business Income and Extra Expense caused by an action of civil authority that prohibits access to the described premises when a Covered Cause of Loss causes damage to property other than property at the described premises. A widespread governmental imposed shutdown due to COVID-19 (coronavirus) would likely not trigger the additional coverage of Civil Authority.

Contamination coverage:
This additional coverage for Contamination will pay for costs to clean and sanitize the premise, if the insured’s operations are suspended due to “contamination.” A governmental agency, such as a Health Department, must close a specific business because of the discovery or suspicion of food contamination. Because COVID-19 is spread through human contact and is not seen as a foodborne illness, it would be unlikely to trigger this coverage.

Product Spoilage coverage:
Product Spoilage requires a specific and unique Spoilage Covered Cause of Loss. These are a change in temperature or humidity due to a mechanical breakdown or failure of equipment, or contamination by a refrigerant or power outage. Any alleged COVID-19 (coronavirus) exposures or spoilage from the extended shelf life of a product is not a Spoilage Covered Cause of Loss.


Liability Coverages:
General liability coverage applies to bodily injury caused by an occurrence. COVID-19 illness allegations presented by third-party claimants would be considered on an individual basis. An important element to proving liability would be evidence that an illness occurred due to exposure at a particular business, and that the business was negligent in allowing the exposure. Both of these would be very difficult to prove in a community-spreading viral outbreak. Allegations of bodily injury by third parties should always be referred to us for review, but it’s unlikely negligence could be substantiated.

Workers Compensation:
The burden to prove that Workers Compensation benefits apply for COVID-19 would be very difficult. Disease claims have specific elements outlined within the Workers Compensation statute necessary to find a claim compensable. These elements would include, but not be limited to, the following, as each state may have additional tests to be met. First a worker must show their job is at a greater risk to exposure than the general public. A worker must also show they contracted COVID-19 while in the course of their employment, and it must arise out of their employment. Both arising-out-of and in-the-course-of tests are required to find compensability. Once again, this is difficult to establish in a community-spreading viral outbreak, but all purported claims should be referred to us for review.

Please Note:

This blog post is to be used to guide businesses through understanding their business' coverage. Decisions will be dependent on your specific carrier. I strongly encourage businesses and individuals to reference the precise wording regarding your coverage and please feel free to reach out to me with any specific questions.