Are Your COVID-19 Business Losses Covered By Insurance?
Over the past few months, businesses both large and small have faced numerous financial and operational challenges caused by the global pandemic. For many, forced closures and social distancing have made it difficult, if not impossible, to continue business as normal. Fortunately, many company insurance plans allow businesses to mitigate losses caused by COVID-19.
Although the following options can provide much-needed relief to businesses during this uncertain time, coverage can vary from one policy to the next. It’s crucial that business owners reach out to their insurance company to determine whether their policy covers pandemic-related losses.
Business Interruption Insurance
Most general liability or property policies include business interruption coverage. This type of insurance covers lost profits and related costs when businesses cannot continue normal operations. However, the interruption must result from direct physical loss or damage to business property. Business interruption caused by COVID-19 may qualify as direct physical loss if the business was forced to close because of virus contamination.
It’s important to note that many business interruption policies include exclusions for property damage caused by communicable diseases, viruses, and bacteria.
It’s not uncommon for business interruption policies to include extensions or endorsements that provide coverage for loss of business income due to civil or military orders. Non-essential businesses forced to close in order to stop the spread of COVID-19 may qualify for coverage if they suffered a physical loss or damage to property while closed.
Supply Chain Risk Insurance
Another option, businesses with supply chain risk insurance or trade disruption insurance may be covered for business interruptions caused by disruptions in the supply chain. If one or more of the businesses’ suppliers shut down operations due to the COVID-19 pandemic, the business may receive coverage for lost income during that time. This specialized insurance does not require physical loss or damage of physical property.
Environmental Premises Policies
Businesses with an environmental premises policy may receive coverage for businesses interruption losses and virus decontamination. Designed to provide coverage during the sudden, gradual, or accidental release of pollutants, COVID-19 may or may not qualify a business for coverage. Many of these policies contain specific language that prohibits coverage for viruses and bacteria.
Although necessary to stop the spread of disease, forced closures have led to significant business losses around the world. Business owners looking to mitigate loss should check with their insurance company about their pandemic-related coverage.
TMDL offers full-service accounting and professional consulting services to businesses across a wide range of industries. Our team helps businesses and organizations strengthen internal controls and utilize resources efficiently. While we cannot provide direct guidance on pandemic-related insurance coverage, we strongly encourage our clients to reach out to their insurance company to determine eligibility.
Please contact us for information about our accounting and consulting services.