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COVID 19 has impacted virtually every business sector:

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Restaurants / Food Services

Congressional Budget Office (CBO) estimates that spending will temporarily decline by about 80%.

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As of March 16 (nearly a month ago), the American Hotel & Lodging Association said “hotels have already lost $1.5 billion.”

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United Airlines, alone, is bracing for a $1.5 billion drop in revenue.

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The worldwide shipping industry is losing around $350 million each week.

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“Stay at home” and “nonessential business” orders in numerous states continue to impact retail businesses.

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With global supply chains interrupted and plants shuttered, manufacturers are taking a hit.

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Apple could lose as much as $67 billion due to an iPhone shortage, and Nvidia (a graphics card producer) lowered first quarter revenues by $100 million.

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Gambling, entertainment, travel, etc.

Are all suffering massive losses.

Three of every four American businesses have experienced a disruption in their supply lines.

The positions taken by insurance companies regarding the availability of business interruption insurance coverage vary from insurer to insurer. Some insurers have taken the position that the coverage available is “very limited, if any coverage,” while other insurance carriers encourage policyholders to report their claims regardless of the size of their losses or questions regarding coverage.

Because of the economic burden from the coronavirus pandemic, which have been estimated to be as much as $300 billion per month, many independent insurance agents and brokers report that insurers are instructing insurance brokers to deny claims.

Commercial property insurance policies

Insurance policies typically cover “all risks of physical loss or damage.” Under the Business Interruption provision, policies also cover lost income resulting from the risk of physical loss or damage.

Long-standing insurance contract interpretation laws hold that “All Risks” policies are interpreted broadly and in favor of coverage. An all-risk policy automatically covers any loss unless the policy contains a provision expressly excluding the loss from coverage. These policies are distinguished from the more uncommon “Named Peril” policies, which only insure against specific risks of loss.

By contrast, policy exclusions are construed narrowly and against insurers because they draft the provisions of the policies and ambiguous provisions or exclusions are interpreted in favor of the insured. In other words, the law protects the policyholder when the policy is not clear.

The threshold issue presented by COVID-19 claims under “all risks” property policies will be whether “physical loss or damage” to insured property has occurred. This will be the key issue in insurance disputes over coverage for coronavirus-related losses.

Cases across the country have held that “physical loss or damage” occurs when a hazardous condition renders the insured property unsafe or the property cannot be used for its intended purpose. Courts have also held that “direct physical loss” existed in the absence of structural damage to the property because the policyholders’ insured structure became unsafe to occupy.

In addition to standard business interruption coverage, commercial property policies also include several coverage sections which may cover coronavirus-related losses, including:

Civil Authority

A civil authority provision may require the order of the civil authority to restrict or prohibit access to either the insured’s property or “property other than the insured premises”

Ingress / Egress

The courts have held that the Ingress/Egress provision covered the insured’s losses due to the inability to access the facility. No physical damage to the property was required

Contingent Business Interruption

Contingent Business Interruption provision covers losses caused by the inability of “suppliers of goods and services” to provide products to policyholders.

Environmental Insurance Policies (Pollution Legal Liability, or PLL)

This provision covers first-party claims arising out of a “pollution condition,” most commonly triggered for the dispersal or migration of any irritant or contaminant into or upon structures or the atmosphere

Event Cancellation Insurance

These insurance policies typically cover the loss of gross revenue in case of:

  • Cancellation–the outright inability to proceed with an event
  • Abandonment–the inability to finish an event once it has begun
  • Curtailment–the inability to open or keep open an event
  • Postponement –the unavoidable postponement of an event

Things you need to know

Your insurance broker may not be presenting accurate information.

Many insurance brokers have an agenda. The insurance companies have directed brokers to discourage policyholders from filing claims. Insurance brokers typically are not attorneys.

There are many strong arguments supporting coverage contrary to broker assertions, many policies do not contain virus exclusions (and virus exclusions may not apply).

The state of the law

Several states have launched legislative initiatives to ensure coverage for policyholders. In addition, many insurance policies contain provisions requiring them to conform to state statutes.