Is Business-Interruption Coverage Available?
With the suspension of business activities because of the coronavirus and resultant governmental shut-down orders, small business owners are reviewing their insurance policies to see whether they have business-interruption insurance for their losses. To those seeking such coverage, there are two major hurdles. First, the policies require that the suspension was caused by direct physical loss of or damage to insured premises. It should be noted that some creative claimants have already filed suit alleging that the presence of coronavirus-positive persons on their premises and the likely spread of the virus have caused some physical damage. But second, many policies contain a virus exclusion, which the insurance industry began using in 2006.
However, the New Jersey, Ohio, and Massachusetts state legislatures are now considering bills addressing the likely insurer defenses of no direct physical loss and the virus exclusion. The most far-reaching bill is Massachusetts bill SD 2888, which would apply to businesses that employ no more than 150 full-time employees. The Massachusetts bill states that no insurer can deny a claim for business-interruption or loss of use insurance on the grounds that COVID-19 is a virus or that there was no direct physical loss to the insured premises. The New Jersey and Ohio bills basically state that business-interruption policies should be interpreted to provide coverage during a declared state of emergency because of the coronavirus.