The economic impact of COVID-19 on businesses is unprecedented. The live question is whether an insurance policy providing for business interruption loss would also provide coverage due to the coronavirus. Typically speaking, this type of insurance coverage responds when a company’s physical property suffers a loss such as by way of a fire. The insurance policy will provide business interruption loss while the company is rendered fully / partially inoperative due to recovering from the “physical damage” sustained by a fire.
The key dispute in terms of whether COVID-19 losses trigger business interruption insurance will revolve around whether actual contamination by the virus or the risk of contamination to the virus are considered a direct physical loss or damage. The traditional interpretation of the policy of insurance would suggest that the policy of insurance would not respond. However, these are far from traditional times. It appears that the government and the courts are taking a more business supportive approach with regards to insurance coverage.
As of the beginning of April, 2020 the states of New York, New Jersey, Massachusetts, Pennsylvania, and Ohio have proposed legislation that would mandate insurers cover COVID-19 related business interruption claims despite virus exclusions in many policies. Perhaps the province of Ontario will not be far behind introducing similar legislation.
A recent decision of the Ontario Superior Court in MDS Inc v. Factory Mutual Insurance Company appears to have broadened the interpretation of “physical damage” in a policy of insurance to include the loss of the use of property even in a situation where there was no actual physical damage. While as that case did not deal with the COVID-19 factual scenario, it does create the possibility that business interruption insurance may respond to the current crises. The courts and governments are acting in a supportive manner to help people and businesses that are being hit hard by the impact of COVID-19. It is possible that business interruption insurance policies will be interpreted in favor of companies as well.
At Schneider Law Firm our partner Cary Schneider will conduct a free review of your commercial policy of business insurance to advise you of your legal rights. Cary was an insurance defence lawyer for 19 years and therefore has a particular insight into how insurance company think, act, and analyse claims. Get him working for you.