COVID-19 — Am I Insured?

Understanding Business Interruption Insurance

With businesses being forced to close many of our clients are asking if their business losses will be covered by their Business Interruption Insurance. The following will hopefully provide you and your business with the information you need to help answer this question.

Business Interruption Insurance typically covers the loss of income a business suffers following a direct physical loss or damage to your business property. Meaning, typically this provides coverage for your loss of earnings (or in some policies profits) that occur when your business is shut down or physically damaged by an insured peril – like a fire or a flood. This coverage is provided for the time it takes to reconstruct, repair, or relocate your place of business. Other operating expenses like the cost to move to a temporary location, payroll, taxes and loan payments may also be covered.

What does this mean in the present circumstances?

Currently, in Manitoba and across Canada many businesses are closed due to COVID-19 and therefore suffering loss of earnings and profit, while still incurring expenses.

While a typical Business Interruption Insurance policy would cover losses for physical damage to your place of business, COVID-19 is not physically damaging your place business, so it is unlikely that you would be covered under a standard business interruption policy for your lost earnings or profits due to a COVID-19 closure.

Are there other coverages?

“Pandemic” coverage does exist. This is typically a special coverage for the loss of earnings or profit due to a pandemic or infectious disease. This special coverage can be an additional endorsement on a business interruption policy or a separate coverage.

Not all insurance companies offer this special coverage. Intact, one of Canada’s largest insurers, does not offer this special coverage, whereas Aviva and AON do have policies that include this special coverage.

I have “Pandemic” coverage, but can I use it?

If your policy includes this special “pandemic” coverage for losses due to business closure – the next question is when it is triggered? Typically, this type of coverage is triggered when a business is forced to close – like by order of the government. Businesses that close voluntarily may not be covered under these special policies.

What about a Mandatory Closure?

There is another type of insurance coverage that may provide coverage for your business and income losses when your business is interrupted by a government or “Civil Authority”.

Civil Authority Insurance typically provides coverage for business losses due to a government closure of a business or when a government prohibits access to a business. However, some civil authority coverages are only triggered by a physical catastrophic event, like hurricane or wildfire. Further, coverage could be limited to a specific length of time (typically 15 and 30 days).

What should you do?

It is important that you review your insurance to determine what coverage you have for your business. You may consider calling your broker to discuss your coverage, as your broker should have a copy of your policy and will be able to explain how your coverage may apply. If you have, or may have insurance coverage, remember to seriously consider and calculate your losses and discuss the costs of submitting a claim with your broker, as there will likely be a deductible and a claim may affect your insurance rates in the future.

You will also want to consider how your insurance may affect any government benefit program. In previous disaster relief programs, the government has provided benefits to people and businesses without insurance. Meaning, that a person or business with insurance would not qualify for the government benefit. If the government places similar restrictions on a COVID-19 benefit, then it will be crucially important for you to understand what coverage you have.