Navigating Business Interruption Coverage Post COVID-19 Pandemic
A lot of us are still feeling the shockwave that came as a result of COVID-19. For a few, that also means you may have been left with bad taste regarding Business Interruption insurance. What good is a coverage called “Business Interruption” if your business which a global pandemic has shut down, doesn’t have coverage that will respond? To which I would provide this Class Action lawsuit for your reference. Still, until this lawsuit is completed, which will take years, and a new precedent is set, Business Interruption may not respond as you initially think.
When Will the Coverage Respond to a Claim?
For Business Interruption (BI) coverage to respond, there must be an actual insured physical loss or damage to your insured property. In the case of the pandemic, insurers argue that because there was not an actual physical loss or damage to property, coverage would not respond, and any claims presented for BI were denied.
So, when will my Business Interruption coverage be triggered? Sometimes, it’s best to paint a picture of when coverage would respond:
Ex) Your restaurant has a fire in the kitchen, rendering your building inoperable (IE: no revenue coming in) until the necessary steps are taken to re-open. From the date of the loss to when you re-open and resume operations, your Business Interruption coverage would come into play (pending a full review of your policy wordings and the claim situation itself).
If you had an insured loss that closed your business temporarily, could you get by without this kind of coverage? You may have adequate coverage on your physical building and its contents, but what if you could no longer operate and earn revenue?
Business Interruption Coverage Types:
Now that you know when the coverage would respond, we must educate ourselves on what kind of coverage you may receive. There are a few different options when it comes to Business Interruption coverage:
- Coverage based on Gross Earnings: Coverage will stop once the business has been rebuilt and you can re-open your doors. Once you can open and begin earning, your coverage will cease.
- Coverage based on Gross Profits: Coverage will stop once the business has rebuilt and has returned to the quality of operations they were experiencing immediately before the insured loss (IE: your gross profit has returned to what it was before the insured loss)
- Coverage based on Gross Rentals: Coverage for the loss of rental income that would have been payable to you from your tenants.
Please note: There are other options and additional coverages available that can be purchased. However, this is a brief overview of some standard ranges that can be offered. This is in no way a complete, detailed description. Additional coverage options should be discussed with your insurance advisor.
Commercial insurance is essential to protecting your business from unexpected events that could result in financial loss. You can protect your business and financial future by assessing your risks, working with an insurance broker, and choosing the right coverage. Remember to avoid common mistakes and read the fine print. With the right coverage, you can focus on growing your business and achieving your goals.
Contact us today to learn how we can help you navigate the world of business insurance.