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COVID-19 Business Interruption Challenges

A breakdown for the current environment.


Nearly every business will be faced with some type of interruption as a result of the global response to COVID-19. The extent to which that interruption results in losses with be greatly varied depending on industry, location, and a host of other factors. On top of every businessowner’s mind is how their insurance coverage will respond. Here the law firm of Saxe, Doernberger, and Vita brings together the top challenges and takeaways.

Assessing Coverage

  • Is direct physical loss or damage required?
  • Does the presence of the virus qualify as physical damage?
  • Civil authority
  • Contingent/dependent property losses
  • Ingress/Egress
  • Service interruption
  • Virus Exclusions

Coverage Obligations

Don’t lose coverage because of an oversight.

  • Timely notice
  • Protect evidence, including computer information and e-mails
  • Responding to insurers/outside adjusters
  • Proof of claim compliance
  • Preservation of property (sue and labor)
  • Avoidance of voluntary payments
  • Independent appraisal (sometimes)
  • Statutory/contractual limitation of action periods

Types of Coverage – Civil Authority and Service Interruption

Losses caused by acts of civil authority that impact access to insured facilities

  • May apply when government acts prohibit access to property of suppliers, providers, or vendors
  • Some policies require a prohibition of access
  • Often limited to 30 days from date of civil action prohibiting access

Damage to utility (electric, gas, data) interrupts service to your location

  • Damage to overhead transmission and distribution lines sometimes excluded
  • Caused by covered peril (flood/storm exclusions may negate)
  • Usually contains a waiting period
  • What happens when utility intentionally shuts down grid to prevent further damage?

Contingent Business Interruption

  • Direct physical loss or damage to a dependent property (supplier or customer)
  • The loss or damage is caused by a covered cause of loss
  • The loss results in a suspension of operations at a location of supplier and customer

Issues that Impact Settlement

  • Period of indemnity
  • Multiple perils
  • Consequential loss
  • Nuclear exclusions
  • Rolling blackout
  • Actual loss sustained
  • Loss of market/Market conditions
  • Idle period
  • Concurrent causation
  • Contingent business interruption

Measurement of the Loss – Maximize Recovery by Allocating to the Right Coverage Buckets

Physical Damage

  • Buildings, equipment, inventory
  • Sublimits: debris removal, expediting expense
  • Exclusions: nuclear, environmental

Time Element Losses

  • Business interruption/Mitigating costs
  • Inefficiencies and additional costs to operate = extra expenses
  • The loss results in a suspension of operations at a location of supplier and customer

Time Element Extensions

  • Extended period of indemnity
  • Contingent time element/CBI
  • Service interruption
  • Ingress/egress, (civil and military authority)

Soft Costs

  • Delay
  • Loss of use
  • Loss of market
Determining Whether Losses May Be Covered:
Step One
  • Was virus present on property?
  • Did the government order your property to be closed?
  • Did the government restrict access to your property?
  • Are contingent business interruption (CBI) coverages in place for both direct CBI and indirect CBI events?
  • Does policy explicitly exclude viruses?
Step Two: Considering Claims
  • In-house team
  • Risk manager, claims manager, safety manager, corporate counsel, operations, finance, IT
  • Outside experts
  • Brokers/Claims advocacy (consultants), forensic accounting, claims engineering, legal
Key Takeaways
You will be faced with an event… it’s just a matter of time.


Be Prepared

  • Review coverage
  • Have your team in place
  • Have your facts and evidence in place

Be Proactive

  • Take charge of the claims process

Differences are inevitable

  • Assess your options
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