BUSINESS INCOME/EXTRA EXPENSE INSURANCE
Does It Apply to COVID-19?
Does Business Income & Extra Expense Insurance Apply To COVID-19 Losses?
Business Income and Extra Expense protection is on the mind of many dealers right now and based on the calls we’ve received, there is confusion as to whether or not this protection could apply to losses due to COVID 19. The short answer is: No. BI/EE Coverage is Tied to Insured Physical Property Damage. Of course, the short answer is rarely adequate, and especially not so when we are traveling in unknown waters.
The key to answering any insurance question is to read the policy; let’s look at the paraphrased policy language as it applies to loss of income:
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. The suspension must be caused by direct physical loss of or damage to property at premises which are described in the Declarations and for which a BI/EE limit is listed…..
What's Included In Physical Loss & Property Damage?
Typically, the losses created by COVID-19 are not the direct result of property damage – such as a hurricane, fire, tornado, explosion; rather they result from people prevented from working, shelter-in-place orders; people unable to purchase vehicles and/or pay for vehicles already purchased , etc. None of these constitute the property damage necessary to trigger BI/EE benefits.
Physical loss requires that property be altered/damaged in some manner and the presence of virus molecules on surfaces does not rise to the level required. There have been some who suggest that gases, odors, etc. could contaminate property without any visible damage. They further this argument by stating that the virus is a contaminant. This argument becomes a bit far-fetched when you realize an investigation would be required to prove the virus actually touched the property to create property damage.
Add to the above, the specific virus or bacteria exclusion endorsements included in most, if not all, property policies and the long answer is also ‘no’.
Of course, I remind my clients that I am not a Claims Adjuster, nor an attorney. I don’t know what is in every policy out there and my answers are based only on my 30+ years of experience. What we are experiencing now will have long term effects on every area of our lives, including insurance. It will be interesting to witness the changes as they occur over the next several years.
Our business is providing insurance protection for your business! As always, I appreciate the opportunity of discussing insurance coverages with you. Please call or e-mail me your insurance questions and concerns. firstname.lastname@example.org
If you’d like additional information on insurance for your business or you’d like to request a quote, please visit https://mulleinsurance.com/#Insurance-quote or give us a call at 972-681-6297.
MULLEN INSURANCE AGENCY, INC
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