Business owners across Canada have seen their businesses grind to a halt over the last few months due to the Covid-19 crisis. Whether the cause was mandated shutdown, interruption of supply chains, lack of consumer demand or a case of Covid-19 in the workplace, businesses are hoping the business interruption clause in their insurance policies will provide coverage for the losses they have suffered. Unfortunately, in many cases coverage is unlikely to be provided under business interruption clauses.
The key to determining if your business loss is covered by the policy is looking at the wording. More precisely constructed policies with broadly worded business interruption clauses are the most likely to cover the effects of the pandemic. On the other hand, general policies often include language that excludes the types of losses being suffered due to the pandemic.
Key Terms to Look for in your Insurance Policy
While insurance terms need to be assessed in relation to the policy as a whole, there are a few key terms you can look for which will give you an idea of what is covered by your business interruption insurance.
1. Physical Damage:
The main reason business interruption clauses often do not cover the effects of Covid-19 is because many policies require the business interruption to be a result of “physical damage.” Generally, this means the business interruption clause is attached to a property or equipment protection clause, and when that property or equipment sustains physical damage making it unusable, the insurance company will also cover the losses suffered due to the interruption to their business. An example of this is when a fire destroys an office. Often the losses from Covid-19 do not result from any physical damage which leads to insurance companies denying coverage.
2. Coverage or Exclusion from Coverage for Loss Due to Viruses:
Another key is looking for any specific references to viruses or pandemics in your policy. You will have a good idea of whether you have a claim if the policy specifically states that losses linked to a virus or pandemic are included or excluded under your business interruption coverage.
3. Supply Chain Coverage:
Some insurance contracts include a form of coverage which is broader than basic business interruption coverage called supply chain coverage. This coverage is more likely to include broad interruption to the supply chain your business relies on, such as a protection for quarantines caused by a pandemic. Having supply chain coverage does not automatically mean your business will be covered, but it may be depending on the specific events covered by the policy.
4. Interruption by Civil Authority:
If your business interruption clause explicitly stakes that it covers interruption by civil authority (often worded “interruption by civil or military authority”) then this may be another good sign you have coverage for interruption to your business if the loss was caused by a government ordered shutdown.
How We Can HelpWhile a general understanding of the terms involved in business interruption clauses can help you determine if you have a claim, it is important that you have the wording of the entire insurance contract assessed by a professional. We can help with that. To have your insurance contract reviewed by one of our expert insurance lawyers, contact a member of our Insurance Law team. We will help you determine if you have a claim and if so, assist you in enforcing your claim with your insurance company.
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