Will my property insurance policy cover coronavirus (COVID-19) losses?

Government-requested and voluntary quarantining, shelter-in-place, and nonessential business shutdowns are affecting economic losses for individuals and businesses. Many organizations are asking if their business interruption policy will cover loss of income.

Most property insurance policies are placed on an all risk basis. The insuring agreements in the policy provide coverage to all risks of physical loss or damage. The physical damage from a peril needs to occur to the property of the insured, not excluded. The burden of proof is on the insurer to identify an exclusion to the cause of loss.

An organization’s claim to the presence of a virus in its facility may not establish a direct physical loss trigger under the policy, as there are often multiple exclusions under the policy the carrier may use to exclude coverage. Many policies also contain a contamination or biological agent exclusion, and virus is included in the definition of contaminant and/or biological agent. In addition, a carrier could point to delay, loss of use or loss of market exclusions. Most insurance company policy forms and many manuscripted policy forms exclude the introduction of a virus as a peril. Some company forms and manuscript policies for industry verticals, like hospitality, contain affirmative coverage for communicable disease as writebacks in the policy form. This coverage extension is sub-limited and in aggregate.

The ability to reach into the policy to obtain time element coverage or business interruption requires the physical loss or damage trigger to be satisfied. Even if it’s determined the actual presence of a virus is physical damage, the indemnity period would only be the period needed to disinfect and clean up the contaminant, plus a possible extended period of liability. The time element extensions most often called into question are civil and military authority and contingent time element. Both of these coverage extensions require physical loss of damage of the insured from a peril, not excluded. Carriers may look to the same exclusion point in the preceding paragraph.

Each insured individual loss scenario and policy is unique and should be reviewed in detail to determine applicability. All insureds who believe they have a loss should submit a claim under the policy in a timely manner.