Business Interruption: Insurers Balk at Paying Claims
When disasters strike, many businesses rely on insurance to carry them through economic and financial rough patches. Not this time.
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Most large to mid-size businesses have business interruption coverage as a natural part of their property insurance policies, says Linda Kornfeld, vice chair for insurance recovery at Blank Rome LLP. While most of those policies do not have express pandemic coverage, she says, most also do not have an express pandemic exclusion.
“Some policies include the term ‘virus’ in an exclusion, but that term is surrounded by many other terms that suggest that ‘virus’ in the context of the exclusion is not meant to exclude losses due to a pandemic,” Kornfeld says.
Instead, those exclusions cover only “traditional ‘pollution’ events,” she explains. An example would be matter growing in standing water or water-damaged wood after a flood, hurricane, or natural disaster, causing dry rot, wet rot, or fungi. Those damages would not be covered under business interruption insurance.
Regardless of any of this language, though, the property insurance industry is taking a hardline “no coverage” approach to all COVID-19 business interruption claims, says Kornfeld, by “stating that their policies are not even triggered unless there has been some physical event akin to a hurricane, tornado, earthquake, or other disaster.”
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“Business Interruption: Insurers Balk at Paying Claims,” by Karen Epper Hoffman was published in CFO Magazine on September 9, 2020.