Business Interruption Insurance Coverage for Wisconsin Businesses During COVID-19

What is Business Interruption Insurance?

Business interruption insurance typically covers lost profits that a business suffers after a disaster. Unlike property insurance, business interruption insurance covers the income that is lost from an event such as disaster-related closing of the business facility or the rebuilding process after a disaster. The purpose of this type of coverage is to put a business in the financial position it would have been in, had no loss occurred.

Typically covered under business interruption insurance policies are: 1) profits that would have been earned but for the disaster; 2) fixed costs; 3) commission and training costs; and 4) extra expenses including reimbursement for reasonable expenses.

How does business interruption insurance work as it relates to the COVID-19 pandemic?

For a loss of income to be covered, most policies require that the loss be caused by direct physical loss or damage to an insured building.

Unfortunately for business owners, most insurers have exclusions in their policies for losses resulting from viruses or bacteria. This will typically include language such as, “The insurer will not pay for loss or damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness or disease.”

Insurance company adjusters are citing that the closing of businesses due to coronavirus was not related to, nor did it cause, actual property damage (such as in the case of a fire or severe storm).

Can the government intervene to help protect businesses under business interruption insurance?

Multiple businesses across the country have filed suit in the legal arena hoping to secure a ruling declaring that when a governmental entity shuts down businesses because of a “dangerous property condition in the area,” that coverage will commence.

In response to the COVID-19 crisis, several state legislatures have proposed bills to provide coverage for business interruption losses, even if coverage is excluded under the policies.

Such an intervention by government to provide insurance coverage for excluded claims would be an unprecedented event. To date, legislators in Massachusetts, Ohio, New York, and New Jersey have voted on this type of legislation.

What can be done with regard to business interruption insurance at this point?

Businesses and insurance companies should review their policies before a determination can be made as to whether coverage exists.

The lawyers at Murphy Desmond are staying on top of state legislation and decisions from courts as to whether COVID-19 triggers coverage of business interruption insurance.

For questions about your business interruption insurance or other coverage in your insurance policy, contact the business lawyers at Murphy Desmond S.C. at 608.257.7181. Our firm has offices in Madison, Janesville, Appleton, and Dodgeville, Wisconsin, to assist you.

Published April 9, 2020