The global coronavirus pandemic has caused a plethora of losses. Apart from loss of lives, the global economy took a massive hit. Governments did not have any other alternative but to implement lockdowns, as a result businesses could not function. Many businesses worldwide suffered huge losses because of this. Even reputed global brands like Zara and Walmart had to shut down a number of their outlets and let employees go.
Businesses purchase insurance packages to avoid sudden losses due to accidents or property damage. The most common form of insurance package purchased by business owners is known as business interruption insurance. Many businesses are filing insurance claims to cover the losses they had to endure due to the pandemic. The question is, does insurance policies account for coronavirus losses?
The answer is a complicated one. You need to take a look at quite a few factors to determine if your business losses caused by the pandemic are covered by insurance. Let’s assume that you purchased a business disruption package to insure your business. First we need to identify the types of interruption that are covered by this.
Firstly, business interruption insurance covers property damage. Insured property that sustain damage due to accidents like fire outbreaks, earthquakes, lightning strikes, or hailstorms are covered by this plan. To get compensation, your property has to sustain damage. Secondly, the property needs to be owned by you. If your business runs on rental property, then it might not be eligible for compensation even if the property takes damage. Thirdly, the kind of peril that has caused the damage needs to be insured. It does not mean that you have to mention every kind of accident that might occur, but perils that are specifically excluded will not be eligible for insurance money. Lastly and most importantly, the loss has to be quantifiable. If all the conditions are true, then your coverage might even pay out for the total period of time it needs to restore your property and get your business up and running again.
Here’s the catch, the damage caused to your business by the pandemic is not quantifiable. You couldn’t serve your customers as the business was closed, and suffered losses because there were no sales. Such kinds of losses are not quantifiable. That’s why it is very unlikely that losses occurred to your business during the lockdown period will not be covered by your business interruption insurance. Without any physical damage to the organization, insurance companies will be reluctant to pay you anything. You might try your luck with a reputed adjuster though.
Complications occur when business owners ask for compensation from their insurance agency as the COVID-19 pandemic is not specifically mentioned to be excluded from regular business interruption insurance packages. That’s why many business owners consider their pandemic related losses to be covered by the package. Due to the fourth condition, it is not possible for them to show that the business has suffered from quantifiable property damage, which makes a strong case in favor of the insurance company and business owners don’t receive any coverage at all.
However, there is another insurance scheme known as communicable disease coverage. After the SARS outbreak, some industries were wise enough to negotiate communicable disease coverage. Though this coverage might not account for all the losses suffered due to communicable disease outbreaks, some money can be recovered for sure. In some cases business owners included communicable disease coverage in their business interruption insurance scheme to make things easier. However, in such a scheme a trigger event has to be outlined in the policy very specifically. If your insurance scheme includes something like this, then you might still be able to recover some compensation from your insurance agency.
Sorry to disappoint those who thought that their businesses were covered by regular business interruption insurance schemes, but this is not the case. That’s why one needs to be smart and seek expert advice while choosing a particular scheme. Then again, it is really difficult to foresee a global pandemic, and those who didn’t include communicable disease in their insurance schemes can’t be blamed for this.
As now the world has seen outbreaks like SARS and COVID-19, it is expected that in upcoming days such insurance schemes will be introduced which will specifically address losses occurring to businesses due to such situations. Federal and local governments should also take necessary measures to provide business owners with safety packages which will help them recover their business losses because of communicable diseases. Otherwise many businesses will never re-open, and the economy will continue to take hits.