Recovering insurance payments for COVID-19 losses

Forced to shutter by edict of the governor to reduce the spread of the new coronavirus, a sign hangs on the front door of a marijuana emporium Monday, March 23, 2020, in Denver. (David Zalubowski/AP)

These are challenging times for California small businesses. Restaurants, retail stores, and other services sustained (and continue to sustain) coronavirus-related losses. Their damages resulted from severe business interruption, event cancellation, loss of supply chains, and loss of customers among other damages. However, business owners may seek to obtain payments for losses if their business insurance policies provide coverage for these losses.

Below are guidelines for business owners on how to navigate these potential insurance claims.

What is business interruption insurance?     

Businesses are generally insured under a General Commercial Liability insurance. Business interruption insurance, also known as business income coverage, is an optional coverage that a business owner may purchase as part of a comprehensive commercial insurance policy. Business interruption insurance coverage generally lists the types of loss it covers. Generally, business interruption coverage may apply only if the business suffered a direct physical property loss that leads to the business interruption (e.g., a fire that damaged the property causing the business to shut down).

What are the losses that may be covered by business interruption insurance?

Losses associated with COVID-19, and which may possibly be covered, include:

• Business interruption costs
• Supply chain disruptions
• Lost revenue or income
• Closure related costs
• Blocked access to a plant or facility
• Event cancellation
• Costs related to COVID-19 lawsuits (including defense costs and third-party liabilities)
• Losses related to customers unable to purchase goods or service

How can I find out if my policy has business interruption insurance coverage?

Whether a comprehensive commercial insurance policy includes business interruption insurance will depend on the specific policy. Businesses with commercial insurance need to get the complete and current copies of their policies and immediately review the coverage provisions.

Will my insurance cover loss of income due to COVID-19?

A business interruption insurance policy generally covers loss of business income. However, business interruption insurance coverage is generally triggered only if there is direct physical loss or damage to a property caused by a covered peril (i.e. fire, water damage, etc.). Most commercial policies exclude loss due to contamination by virus, bacteria, or other microorganisms. A careful review of technical provisions of the policy is necessary to determine what may be covered and what is excluded.

How do I know if COVID-19 is not covered in my policy?

Many commercial policies have exclusions for loss due to contamination by virus, bacteria, and other microorganism and similar perils. However, some policies may be silent (i.e., does not expressly exclude) losses from viral/bacterial contamination that results in an epidemic or pandemic. If the policy is silent on the exclusion of these types of perils, then an argument for coverage due to these losses may be made.

COVID-19 is highly contagious and a common method of contagion is touching infected surfaces. Hence, it can be argued that a workplace infected with coronavirus is “physically damaged” for purposes of a claim. Creativity on counsel advocating for the insured or policyholder is imperative in this instance.

The government has ordered a shelter-in-place and I have to close my business and send my employees home. Is this loss covered?

Generally, losses that result from the actions of a civil authority are covered only if there is physical damage to the insured premises caused by a covered peril. Again, the policy provisions, particularly regarding Civil Authority coverage, is determinative.  For instance, coverage may be found to cover loss of business income or the incurring of expenses when access to the insured premises is specifically prohibited by order of civil authority as the direct result of a covered peril.

If my employee is infected with COVID-19 and has to be off work, is this loss covered by insurance?

Per California Governor Gavin Newsom’s March 12 Executive Order: “if workers are unable to do their usual job because they were exposed to and contracted COVID-19 during the regular course of their work, they may be eligible for workers’ compensation benefits.” For example, health care workers may have become infected from caring for patients. They may be entitled to workers’ compensation coverage.

The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com. [C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully recovered wages and other monetary damages for thousands of employees and consumers. He was named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a Presidential Awardee for Outstanding Filipino Overseas.]