Commentary: Does Business Income Insurance Cover Coronavirus Shutdowns?

By | March 24, 2020

  • March 24, 2020 at 1:18 pm
    Jack says:
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    I bet the policy doesn’t specifically exclude damage or loss of use caused by Godzilla either. That will be the next lethal weapon of mass destruction released by the Chinese. :)

    • March 24, 2020 at 1:21 pm
      Craig Winston Cornell says:
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      Excellent. Made me laugh.

    • March 24, 2020 at 3:06 pm
      Bill says:
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      Jack, you’re confusing China with Japan.

    • March 24, 2020 at 3:08 pm
      FFA says:
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      Japanese… “Oh no, there goes Tokyo oh oh Godzilla!i”.

    • March 25, 2020 at 5:18 pm
      I,Expert? says:
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      Jack, wouldn’t the “Nuclear” exclusion apply for the Godzilla claim? Just askin’ for Bill Wilson! :-)

  • March 24, 2020 at 1:51 pm
    JohnM says:
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    I have received exactly ONE call from a commercial insurance client asking about coverage for BI in the event he has to shut down. I “opined”, like the author of this article, that after a quick review of the policy language, there does NOT appear to be an insurable loss due to shutdown based on COVID-19, the so-called “Chinese virus”. He was satisfied with the response.

    PS…spare me the replies relating to my “implied bias” as to the quote “Chinese Virus”. Next time you order Mexican food, Chinese food, Italian food, Indian food, or spread honey on your English muffin or catsup on your French fries, consider your own “implied bias”.

    • March 24, 2020 at 3:10 pm
      FFA says:
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      Chinese Virus used to refer to a computer virus. Funny how the meaning changed…

      • March 25, 2020 at 5:17 pm
        bob says:
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        And you have finally succeeded in making me feel old. Well done!

        I’m not actually old yet, but I do indeed remember this from high school. If you got a Chinese virus you were in big trouble.

        That was way back in 2003.

      • March 25, 2020 at 5:19 pm
        bob says:
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        Way back when my dad was all about the virus software to stop the Chinese viruses, and hackers.

        Good times. And it wasn’t said to belittle back then. I played games in which we were like nooo!!! Not ASIAN and CHINESE hackers!!!!!

        Because really they were the best at it, and there were a lot of early games they would mess with your lobby in game. Phantasy star online being one.

        • March 26, 2020 at 11:22 am
          Jon says:
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          LOL phantasy star online was on the frigging dreamcast no one was hacking it back in 2000

  • March 24, 2020 at 5:33 pm
    John Anderson says:
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    Well written article but let’s forgo the mis-assigned racist humor found in the comments.
    The breakdown and detail provide interesting cocktail conversation and at the end of the day it will all boil down to intent.

    For underwriters and actuaries, in this evolution of the insurance contract, I find it difficult to believe that they contemplated covering a viral pandemic without setting a specific insuring clause, capping limits and providing the parameters for trigger (in order to calculate requisite funding against probability). It could happen but unlikely

    • March 24, 2020 at 6:25 pm
      CO_yeti says:
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      Agreed, the people that find this a time to pull out the racist humor must not have very many commercial clients… this situation is destroying a large set of small businesses and employees and trickling up into middle market.

      The CFOs, risk managers, CPAs, etc that are employed by the affected businesses wouldn’t be doing their job if they didn’t pursue all avenues.

      Ultimately it doesn’t matter what the carriers intended, it is the wording of the insurance contract. If there are holes I’m sure they will be tested in the courts. High severity losses always do.

      • March 25, 2020 at 8:33 am
        knowall says:
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        I’ve been in the industry for awhile now and I’ve come to the conclusion that insurance is 90% common sense and 90% what’s in the policy language. (no, it doesn’t always add up to ‘logic’)

        • March 25, 2020 at 5:15 pm
          I,Expert? says:
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          To knowall: You forgot the 50% part where the Judge says: “Yeah, well, I don’t read it that way, and I think…”

          Or better yet, the Mediator says, “Do you folks REALLY want to take this case to court and make some bad law?” And they settle.

          • March 25, 2020 at 10:09 pm
            knowall says:
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            Good points.

            I saw one case where the judge read the applicable regulations, which were mostly accounting related, and said to both sides after reciting the applicable section, “Who cares?!” but then he had to rule.

    • March 26, 2020 at 10:14 am
      CL PM says:
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      My company insures small businesses (50 employees or less) on a BOP. We use the ISO form and it clearly (to me anyway) excludes Biz Income losses caused by a virus. We understand that coverage issues could be decided differently, but hope reason prevails. I feel better this morning after reading details of the bill passed by the Senate. Our customers can all get loans from the Feds. If the loans are used to for payroll, rent, and utilities, they don’t have to pay back that portion of the loan and shouldn’t make a claim on their policy for those expenses. So the Feds are stepping up to cover the Biz Income gap. My hope is this significantly reduces the insurance industry’s potential obligation. Does anyone read the bill differently? Differing opinions are helpful.

  • March 27, 2020 at 2:31 pm
    Hector Projector says:
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    Please chime in if you know of a business that found evidence of coronavirus on its premises and shut down in order to clean it up. If that’s what businesses are doing, then talking about whether policies cover business interruption for coronavirus makes sense. However, business with no evidence of contagion on their premises are shutting down due to government mandates. The question should be whether policies cover business interruption due to government mandates.

    • March 29, 2020 at 5:01 pm
      Bill says:
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      The article addresses that.

  • March 27, 2020 at 2:35 pm
    Hector Projector says:
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    Also, calling the coronavirus the Chinese virus is race based humor, not racist humor. You have no way of knowing if someone posting comments on this site is Caucasian. If someone posts that they are Caucasian and then call it the Chinese virus, then that’s racist. C’mon, learn the rules.

    • March 29, 2020 at 5:05 pm
      Don says:
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      https://www.dictionary.com/browse/racist

      noun
      a person who believes in racism, the doctrine that one’s own racial group is superior or that a particular racial group is inferior to the others.

      adjective
      of or like racists or racism:

  • March 27, 2020 at 6:33 pm
    FurriePrincess says:
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    The virus isn’t shutting down the businesses, Civil Authority is. There appears to be no physical damage to the businesses or nearby areas, unlike an approaching wildfire or a gas leak. Most of the forms have a coverage trigger of physical damage. It doesn’t always say to the insured premises but it requires a covered peril to cause damage. With that requirement in most of the commercial coverage forms, in this pandemic the loss of use is not covered.

    • March 30, 2020 at 7:36 pm
      Libby says:
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      Very good point Princess! I was leaning towards coverage applying, but now I’m going back to look at a Lloyd’s property form.

  • March 30, 2020 at 10:37 am
    InsRecoveryAtty says:
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    Interesting to me that the sentiment expressed in comments by insurance agents seems to be that their policyholder clients should receive no relief from the BI insurance coverage the agents sold to their clients. I expect judges to try to find a reason to extend coverage to distressed policyholders, particularly where the insurer decided not to add the virus and bacteria exclusion to the policy.

    • March 30, 2020 at 2:42 pm
      Tiger88 says:
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      Atty: I think its not really a “sentiment” but rather most of our opinions follow the true business income policy forms, coverages and exclusions. I do think that a majority of insurance agents do favor a direct pass through of government grants wherein the insurance carriers pass on certain amounts of business income replacement through their claims system (and that include a reimbursement of carrier claims costs). this would be the most efficient way to handle some replacement of lost income without going down the litigation road (times millions of businesses).

  • March 30, 2020 at 1:35 pm
    906! says:
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    Watch yourself. Someone may come to see you in their Jeep Cherokee or Jeep Comanche. It they are more of an sedan type maybe a Pontiac of some type.



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