March 23, 2020—While many policies do have business interruption coverage, a significant number of these policies exclude compensation for communicable disease outbreaks like the COVID-19 virus, according to Zenefits. Business disruption insurance includes coverage in the event of a natural disaster or fire.
For businesses that have interruption insurance, the threshold for recovery generally depends on a series of factors:
- The property has to sustain damage (e.g., a lightning strike)
- The property must be insured (so renters might not be covered)
- The peril itself must be insured (not specifically excluded)
- The loss must be quantifiable
Companies may see business slowdown, incur a loss of revenue, experience disruptions in the supply chain, or completely close due to the need to disinfect. But none of these would be the result of physical damage, and none would trigger payout from a typical business disruption policy.
For an small business to get full coverage for business disruption due to a communicable disease, they will need to purchase “contingent business interruption coverage” that specifically includes loss of commerce caused by disease as well as other disasters.