The Business Interruption Policy and Covid-19 Saga

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Covid-19 Saga

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Pandemics always have negative impacts on the world’s essential sectors, including the financial system. Once again, another universal disease called Coronavirus, or as much may see it, Covid-19, has affected the financial industry so severely that many will have to begin from scratch.

This situation directs every business-wise individual and his/her motive to the same question on every mind—does business interruption insurance cover COVID-19 coronavirus?

Hmm. It sounds like a vague question, covered with so many facts. Put another way; the only way to get an accurate answer is by understanding what the policy talks about, how it works, and the right position to secure your company’s loss.

How business interruption insurance policy relates to Covid-19 

First of all, what is the business interruption insurance policy? — The same approach you would like to take. Well, it serves as a policy covering insured properties and resources of many businesses across the world.

In simple words, it is only valid when a company faces a direct physical loss, usually due to unforeseen occurrences.

Businesses covered by this policy are in safe hands, regarding property and income loss. And to state clearly, coverage is usually processed during the restoration period and after the cause of activity suspension.

After the SARS outbreak, enterprises began to exclude the “loss of property due to virus and bacteria” policy. And it was because they fell victim to huge losses and couldn’t claim insured properties.

Their inability to cover losses was as a result of the above policy’s activeness. Hence, business owners have been excluding it to partake in the business interruption insurance policy ever since.

So, Does Business Interruption Insurance Cover COVID-19? We are close to knowing if it does.

Who gets the business interruption insurance coverage?

Although almost every sector is on pause because of Coronavirus, only a few will get coverage for losses. It is important to note that even registered businesses may find it challenging to retrieve income for damages.

If your income property insurance has the business income coverage included in it, read through your policy and use your lawyer’s help to go through it. If it has been omitted, your chances of getting this insurance are very slim.

Safe to say, people getting these benefits must have undergone direct physical losses, which means there should be a suspension of the immediate use of physical properties.

What does the exclusion of the loss of property due to viruses or bacteria mean?

In 2003, the SARS virus came out, destroying multiple business properties and causing a wrap for some others.

In 2006, when related to Coronavirus, more billions were lost, and insurers looked to exclude the policy from their terms and conditions.

Thus, the Insurance Services Office (ISO) CP 01 40 07 06 | Exclusion of loss due to virus or bacteria came in place for the loss coverage.

The form consists of different segments that clearly state its policy and terms. Notably, it doesn’t include loss from ‘fungus,’ as that comes from a different cause.

General liability policy; does it cover losses from Covid-19?

Do you think it does? General liability policy deals with third party losses. This policy covers business sustaining a loss due to third party damages — damages of other people’s property — caused by your company.

Coming to the real issue at hand, Coronavirus may not be capable of covering losses with a general liability policy. Simply because the virus doesn’t have its source from your end, it won’t cover any damage made from the said virus.

Other vital bills and policy relating to this virus 

Schools, churches, mining industries, banks, and many other sectors are on pause. This unforeseen pandemic has caused most businesses huge losses. So, the best solution they can get is to gain coverage for damages made.

But the truth is, the Business Interruption Insurance may not cover all losses. On the other hand, some bills are related to this virus in one way or another. Hence, people with these policies may partake in the coverage.

Bll 

Bll covers non-revenue losses of insured businesses and often come in place whenever there are losses on extra expenses. Notably, it is always due to an interruption or interference. During the SARS outbreak, companies who had Bll fought to get the said coverage. It was then that its terms and conditions were made clear and precise. It goes that unless a company undergoes total suspension of business activities, it may not be getting any coverage. Other policies are:

  • Civil Authority policy: it becomes active whenever there is a public authority denial of premises.
  • Contingent Bll: comes in place if there’s a direct physical loss, affecting an insured neighbor. It could be a business owner, supplier, or client.

Bottom line 

It’s high time business started the “exclusion of loss due to virus or bacteria” policy. This act is the number one checkpoint; if at all, you would be recovering any loss from COVID-19.

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