May 21, 2022
  • May 21, 2022

Relief for business disruption due to COVID-19?

By on February 19, 2021 0


Can Business Interruption Insurance Help Businesses Affected by the Pandemic?

Companies have looked for different ways to stay afloat. Some have sought the help available from the federal government, such as through the Payroll Protection Program. Government relief has generally been designed to help cover salaries and other business expenses. Businesses have been forced to identify and seek other ways to recoup revenue lost due to the government-ordered shutdown or losses naturally resulting from the coronavirus pandemic.

As a result, companies are increasingly seeking relief under their private commercial property insurance policies for business disruptions caused by COVID with mixed results at best. The chances of success depend heavily on the language of the individual insurance policy involved.

Business interruption coverage most often applies in the event of a natural disaster, such as fire or storm. This insurance covers damages resulting from the closure of a business, and may also cover damages resulting from the closure of the businesses of customers or suppliers. The key to recovery is the ability to demonstrate that there has been direct physical loss or damage to covered property caused by the natural event.

Some policies also include what’s called Civil Authority coverage, which allows recovery of damages resulting from government orders that cut off access to one’s property. This coverage, although it does not require proof of damage to the insured’s property, often requires proof that the government order arose out of underlying property damage. In recent cases reporting losses for COVID under civil authority provisions, courts have focused on whether the government order is based on a finding that COVID is actually present on the property. in question.

When analyzing a policy, it makes sense to look first for those provisions that expressly exclude the claim. Many policies contain what are called “virus exclusions”. While virus exclusion language varies from policy to policy and has evolved over time, one example is language that excludes recovery of “damage caused directly or indirectly by … any virus, bacteria or other microorganism which induces or is capable of inducing physical distress. , disease or illness. A Connecticut district court ruled that this language precluded recovery of any damage resulting from COVID.

In the absence of an applicable exclusion, the central question is whether the presence of the coronavirus which spreads in the air, but survives on surfaces for days and interferes with the ability to use goods, causes losses or material damage. The insurance industry has argued that COVID claims are not covered because the existence of the virus on the surfaces of goods does not actually cause physical damage to such goods, claiming that actual material damage is a prerequisite to the cover. In contrast, when the wording of the policy covers “physical loss or damage”, policyholders have argued that deprivation of the use of property is covered. Policyholders rely on several arguments, including the use of the word “or”, the lack of properly defined terms, and that any ambiguity in the language of the policy should be interpreted against the insurance company.


There are a variety of other arguments that can be made by policyholders requesting business interruption coverage depending on the language applicable in each case. It is important that companies considering available coverage thoroughly review the wording of the policy so that the arguments in favor of coverage can be carefully tailored to meet the specifics of that policy. Indeed, at the litigation stage, the skill with which the complaint is drafted can make the difference between winning and losing a business interruption case.

Hard-working businessmen should take advantage of all available remedies to tackle losses from COVID. Such a remedy may already be available with the right commercial property coverage.


Lawyer David A. Slossberg leads the commercial litigation practice at Hurwitz, Sagarin, Slossberg & Knuff. He is the editor of the Connecticut Definitive Unfair Trade Practices Treaty. He can be contacted at [email protected]