Coronavirus and Business Interruption Insurance: Are You Covered?

Fran
Fran Majidi
March 4, 2020

The Center for Disease Control (CDC) has warned Americans that it is not a question of if coronavirus will spread to your area, but when it will. After news spread about the first coronavirus death in Los Angeles, California, fear began gripping the entire country because we are all realizing that no one is immune. Coronavirus is spreading faster than most people first anticipated and everyone is scrambling to buy the last remaining face mask as well as enough food and water to sustain them if the situation turns into a pandemic. Prepared for the worst, many people are prepared to do anything to prevent infection, even hunkering down at home.

Some experts are reporting that face masks only magnify the problem but their warnings are falling on deaf ears. Gym memberships and yoga memberships are getting frozen. Malls and movie theaters are no longer packed with crowds. Everyone’s doing their own manicures and pedicures. People are dining at home.

Whether or not you think the coronavirus is something to fear, most people are freaked out, even to the point that shares of Corona beer, which has nothing to do with the virus, have plummeted. Not only are all types of stocks taking a plunge in anticipation of this much dreaded virus, but businesses are also taking a hit. This begs the question, “Will business insurance cover a business due to coronavirus?” The answer is complicated.

Does Business Insurance Cover Coronavirus?

Generally speaking, a pandemic is sometimes covered by business interruption insurance, even though business interruption coverage usually pertains to damages to property as a result of a catastrophe. With that said, many factors affect whether a loss would be covered by an insurance policy or not. The most important factors are what’s specifically written in the business insurance policy and the named perils on that policy. It’s also important to look at the employees who are also at risk of contracting the disease and a company’s responsibility, such as insurance coverage for those employees. Below are coverages that may apply.

Workers Compensation

Let’s look at workers. What if they get sick? With a workers compensation insurance policy, the business must prove that the loss to the employee happened over the course of employment. If coronavirus spreads and there is a public service announcement to stay home and you still require your employees to report to work and they get sick, you’d first get in trouble for ignoring the authorities, but it would be easier to prove that the work situation enabled the spread of the virus. Otherwise, it would be difficult to establish how someone who works for you got sick with the virus, especially if other workers remain healthy. If quarantining goes into effect, commuting to work may be classified as “traveling to infected areas” and workers compensation may cover an infected employee.

What Should I Do to Avoid a Loss with My Business’s Workers Comp Insurance?

It’s a good idea to familiarize yourself with the workers compensation laws of your state, so research areas where pandemics are highlighted. If coronavirus begins spreading like wildfire and reaches the point where traveling to and from the office may be considered a risky act, coronavirus will be classified as a pandemic. The workers compensation laws in your state may specify what you need to do if containment becomes a problem.

It’s also important to immediately report any employee who seems to be infected. Sending that person home is not enough. It must be determined if that person is a carrier. Also, other employees who’ve been in contact with that person will need to be tested.

In the case with the woman in California who contracted coronavirus on a cruise ship, all other passengers were tested after her case was reported. Luckily they were healthy.

If your employees are scheduled to travel, or regularly travel for work reasons, and become infected, they would likely be covered by workers compensation.

If mass quarantines are enforced by law, business operations would come to a halt for many business owners. That’s why it’s important to get connected with a commercial business agent who can guide you through your options, like possibly buying an individual voluntary workers compensation policy to address the coronavirus outbreak and the financial impact it may have on your business.

“I Have to Shut Down My Business Because of Coronavirus!”

Let’s say that your business involves constant travel to and from South Korea and there’s a travel ban on that country because it’s an affected area. How would you conduct business? Or, would you be forced to close down?

Let’s say you own a hot yoga studio and maybe one or two people are showing up now that people in your state are sick with coronavirus. You’re taking a loss and it would make sense to close the business, no? If you’re thinking that it may only need to be temporary, then you should know that there is Business Interruption Insurance, a coverage that actually covers the business lost during an express amount of time.

What Is Business Interruption Insurance?

Generally speaking this coverage protects physical loss or damage to insured property. As you can imagine, coronavirus does not cause physical loss or damage. However, some policies include coverage for income loss associated with illness, murder and suicide at or near an insured building. If your town is infested with coronavirus and there’s a halt to business because of it, you may be covered. These types of policies are usually sold to businesses that specialize in hospitality, entertainment and retail but you may buy this type of policy regardless of the industry.

What Is Trade Disruption Insurance (TDI)?

If you buy parts or the material you need for the product you sell, you may have some trouble doing business in countries deemed high-risk of spreading coronavirus. Trade Disruption Insurance would cover you, if any of these situations bring your business to a halt:

An emergency closure of ports and transportation centers at the order of local and/or federal government agencies.

If there is an imposed quarantine.

If there is confiscation or seizure of products relevant to your business.

Embargo of potential contaminants from overseas or high-risk states.

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