Business Interruption Insurance – Can you make a claim for lost income caused by COVID-19?

coronavirus insurance coverage

Do you (or someone you know) own a small or mid-sized business that has lost income from the Coronavirus pandemic?

Does the company have business insurance coverage?

Does the company pay premiums every month for that coverage?

The billion dollar exclusion relied upon by the insurance industry:

Did COVID-19 cause damage to property on your business premises? YES

Reason being, most States (City/Municipality) have issued executive “Stay at Home Order(s).” Most of those Orders specifically and purposefully reference “property loss.” For example, Governor Polis issued the following Executive Order: Colorado Executive Order – D2020 – 024 – Governor Jared Polis, April 6, 2020:

My administration, along with other State, local, and federal authorities, has taken a wide array of actions to mitigate the effects of the pandemic, prevent further spread, and protect against overwhelming our health care resources. COVID-19 also physically contributes to property loss, contamination, and damage due to its propensity to attach to surfaces for prolonged periods of time. On March 25, 2020, I issued Executive Order D 2020 017 ordering Coloradans to stay at home (Stay at Home Order) and CDPHE issued its corresponding Public Health Order (PHO) 20-24 implementing stay at home requirements.

Did a Civil Authority Directive cause the business to incur loss of income or additional expenses? YES

A majority of business insurance policies contain a provision which affords coverage in the event that your business gets shut down or interrupted by a governmental order. If your policy contains such a provision, you may have coverage for income losses related to the Coronavirus shutdown.

Insurance policies providing business interruption and civil authority coverage often have provisions stating that before these types of insurance coverages apply, the business must have sustained a “direct physical loss of or damage to property” at the business or a certain distance away from the “insured premises”. But “direct physical loss” and “damage to property” can be broader than you might think, and they don’t necessarily mean “physical damage to property” in the sense that property has been destroyed or damaged by fire, hurricanes, or other natural disasters.

Some Examples:

In Colorado, a case opinion issued in 1968 (Western Fire Ins. Co. v. First Presbyterian Church437 P.2d 52, 55 (Colo. 1968), held that “the insured suffered a ‘direct physical loss’ where the insured, acting upon the orders of the Littleton Fire Department, closed the church building ‘because of the infiltration of gasoline in the soil under and around the building, which gasoline and vapors thereof infiltrated and contaminated the foundation and halls and rooms of the church building, making the same uninhabitable and making the use of the building dangerous’” (emphasis added). This ruling issued almost 60 years ago remains good law in Colorado.

A federal court in Oregon recently found that the “temporary infusion” of an outdoor theatre with smoke from local wildfires constituted physical loss or damage to the theatre. Oregon Shakespeare Festival Ass’n v. Great Am. Ins. Co., 2016 WL 3267247, at *5-6 (D. Or. June 7, 2016).

A federal court in New Jersey held that the owner of a packaging plant suffered a “direct physical loss” under a property insurance policy when the plant had to be temporarily shut down for remediation work after the plant was contaminated by an ammonia leak. The court concluded that “the heightened ammonia levels rendered the facility unfit for occupancy until the ammonia could be dissipated.” Under these circumstances, the ammonia discharge caused “direct physical loss or damage” to the plant. Gregory Packaging, Inc. v. Travelers Prop. Cas. Co., 2014 WL 6675934, at *6 (D.N.J. Nov. 25, 2014).

Does my policy contain exclusions for viruses or disease? MAYBE

However, your policy likely has other exclusions which contradict or offset your claim. One such exclusion pertains to viruses. However, even if your policy contains this common exclusion, the Civil Authority clause may override the exclusion and afford coverage.

The Cause of Loss Form:

Like most insurance claims, filing the proper claim form must be done with specificity. The details you include may affect the coverage decision. For example, stating the covered cause of loss. Was it the Coronavirus or the Government shutdown that caused the loss?

Do I need an attorney? YES

If you need assistance in making a claim or fighting the denial of a claim, please give us a call. If you are uncertain whether you can file a claim, please call or email one of the LLS premier insurance bad faith attorneys. We do not charge a fee to review your policy. Your request can also be submitted on our website:

We are here to help guide you through these unprecedented times. Stay healthy, be kind, and lean on one another. Together, we will weather this storm and become better people for having done so.

Regards, Vance