If you have a comprehensive insurance package for your business, chances are it includes business interruption coverage. And if you suffered the devastating effects of the COVID-19 pandemic, you may have already discovered that your coverage does not extend to communicable diseases. For those of you without such coverage who are now looking to add some to your policy, this blog article provides a basic summary of business interruption insurance and how it may be useful in the future.
What is Business Interruption Insurance Coverage?
Business interruption insurance (BII) covers the loss of income that a business suffers after a disaster. For this reason, it is also referred to as business income insurance. It is frequently included as part of a business insurance plan rather than a stand-alone policy. As with all insurance policies, some types of income loss are covered, and some are not, depending on the specific type of disruption.
If your business can’t serve customers, sell products, or work with clients because of property damage, business interruption insurance can help compensate for lost revenue.
Why Aren’t Communicable Diseases Covered in My Policy?
They may be. You should always read your policy, but if they are not, it’s likely because of SARS. After the SARS outbreak in 2003, insurance companies paid out millions in benefits. As a result of the losses, many insurance companies added communicable diseases to their list of exclusions.
Even if your policy has a communicable disease rider that would extend coverage to closures due to infectious diseases such as COVID-19, the policy terms may require you to prove that the disease was present on your property (i.e., either your staff or customers fell sick).
What if My Policy is Ambiguous as to Coverage?
Typically, BII policies are triggered by a physical loss. Something is damaged that prevents you from conducting business. BII doesn’t cover the repair or replacement of that item, it just covers the loss of income as a result of your inability to do business. In the absence of a physical loss, it may be difficult for you to argue that coverage should apply.
Takeaway
If your business is experiencing difficulty and needs to reorganize, Contact CASHMAN LAW today for a free consultation to see how we might help your company protect its growth.
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