Are Your COVID-19 Business Losses Covered By Insurance?

Michael Delano | July 10, 2020

In recent months, businesses of all sizes have faced significant financial and operational challenges due to the global pandemic. Forced closures and social distancing measures have disrupted normal business operations, making it difficult for many to sustain their usual activities. Fortunately, many company insurance plans offer ways to offset losses caused by COVID-19.

Professional liability insurance is essential for small businesses offering tax preparation and bookkeeping services. This coverage can help cover legal expenses if a client sues your company for errors in your work. Without it, you would have to bear the costs of claims related to mistakes or omissions on your own.

While the following insurance options can provide essential relief during this uncertain period, coverage can vary between policies. Business owners should consult their insurance provider to determine whether their policies include pandemic-related coverage.

Business Interruption Insurance
Most general liability or property insurance policies include business interruption coverage, which compensates for lost profits and associated costs when businesses cannot operate normally. However, this coverage typically requires direct physical loss or damage to business property. COVID-19-related closures due to virus contamination may qualify as such a loss.

It’s important to recognize that many business interruption policies exclude coverage for property damage caused by communicable diseases, viruses, and bacteria.

Civil Authority Coverage
Many business interruption policies extend coverage to include loss of income due to civil or military orders. Non-essential businesses forced to close to curb the spread of COVID-19 may be eligible for coverage if they experienced a physical loss or damage to property during the closure.

Supply Chain Risk Insurance
Businesses with supply chain risk insurance or trade disruption insurance may receive coverage for interruptions caused by supply chain disruptions. If the COVID-19 pandemic caused one or more suppliers to cease operations, businesses may receive compensation for lost income during that time. This specialized insurance often does not require physical loss or damage to property.

Environmental Premises Policies
Businesses with an environmental premises policy may receive coverage for business interruption losses and virus decontamination. These policies typically provide coverage for sudden, gradual, or accidental releases of pollutants. However, COVID-19-related losses may or may not be covered, depending on policy language regarding viruses and bacteria.

Final Thoughts
While measures to control the spread of COVID-19 are necessary, they have led to significant business losses worldwide. Business owners seeking to mitigate loss should review their insurance policies and consult with their providers to understand their coverage for pandemic-related situations.