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Does My Business Insurance Cover Covid-19?

Friday, 27 March 2020

With the growing concern and threat of COVID-19 affecting your business, you may be wondering if your business insurance can help you in this time of uncertainty. Perhaps one of your staff are infected with the virus and you must quarantine your workers affecting productivity and profitability, or perhaps you are required to temporarily close your business for a period of time as a non-essential service. Commercial insurance is very specialized to suit your needs as a business owner, so while we discuss general coverages in this blog, we encourage you to speak directly with your broker to see what your policy may or may not cover.

What Is Business Interruption Insurance?

When your business experiences a direct loss, damage or destruction to the business property by a covered peril, business interruption insurance can be there to help if your company must shut down temporarily while the property is being repaired. Essentially, business interruption insurance will cover business-related costs during the down-time of your company in events covered by your insurer such as revenues, rent, or utilities. These coverages vary based on your policy. Here are a few types of coverage you would have considered when purchasing your policy:

Named Perils Vs. Broad Form: A named perils policy covers losses caused by the perils listed in your policy.  A Broad Form policy provides protection against loss caused by any risk that is not specifically excluded from your policy.

Gross Earnings pays only until damaged property or equipment is repaired or replaced. It does not cover you until your earnings return to normal. For example, your competitors might take away some of your business – for this you are not covered. There are limits to duration of time your policy will cover (ie. one month).

Profits will continue to pay until your business resumes normal, pre-interruption level of income. This is subject to the period of indemnity listed on your policy.

Extra Expense: If your business is of the nature that it must remain open while affected by damage, you may require additional coverage related to extra expenses. For example: having to outsource work, setting up temporary utilities, advertising, having to rent/move to a different location to carry on business.

When does Business Interruption Insurance Cover Me?

As each commercial policy is catered to your specific business needs, there are some specialized coverages that can be purchased that might cover the down-time you may experience at your business during the COVID-19 pandemic. Be sure to speak with your broker to see if you have any of the below coverages.

According to the Insurance Bureau of Canada, Contingent Business Interruption Coverage, Stand-alone Business Interruption Coverage and Supply Chain Disruption Coverage may be triggered as a result of the World Health Organization's declaration of a pandemic

Contingent Business Interruption Coverage is designed to cover an insured’s business income loss resulting from loss, damage, or destruction of property owned by others. This includes direct “suppliers” of goods or services to the insured and/or direct “receivers” of goods or services manufactured or provided by the insured. The property damage to these suppliers or receivers must be of a type that would be covered by the insured’s policy had that damage happened to them.

Supply chain disruption coverage may react to an insured event that is not limited to physical loss or damage. Coverage is for business interruption as a result of disruption or delay in the receipt of products, components, or services from a named supplier or supply.

Situations where you might not be covered:

Most insurers' policies will read something like this, “We will pay for the actual loss of business income you sustain due to the necessary suspension of your “operations” during the period of “restoration.” These definitions will vary for insurers; however, claims must meet certain requirements in order to qualify for business interruption insurance.

  • Physical damage requirement: Policies may require proof that the insured property sustained physical damage (ie. from fire, heat, or flooding) that was covered under their property policy, causing an interruption that resulted in a loss of business income. Note that a business that is interrupted due to the loss of data or a loss of utilities may not have sustained a physical loss. (A separate “utility loss coverage” would cover the second instance.) 
  • Period of restoration: If business interruption coverage is triggered, a significant issue is defining the period of indemnity or, as some policies refer to it, the period of restoration. Most policies will pay business income loss through to the point that the business is restored or when the coverage expires (usually 12 months from the beginning of the interruption). 

Other Options

The Government of Canada has now rolled out a Canadian Emergency Wage Subsidy (CEWS) program to assist small business in keeping their workers employed. The program will supply up to 75% of wages for a period of up to 12 weeks for businesses that have lost 30% revenue in an attempt to eliminate further layoff of employees. 

Talk To Your Broker

If your business may potentially need to close temporarily, be sure to speak with your broker to see what coverages on your policy may be able to help you. Here at Billyard Insurance Group, we are working to provide the best possible service for you and your business. Our trusted brokers are still available by phone and email to answer any questions you may have about your coverage. In addition, our claims line is still available 24/7.