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Business Interruption Insurance and COVID-19 (Andrew Meadors Commentary)

3 min read

My epiphany on this crisis occurred almost a month ago when a good friend, a well-read doctor, sat down for dinner and said, “We were really looking forward to going to [a certain sporting event] this fall, and we are sad that we won’t be going now.”

“Why are you not going?” I asked, sincerely.

He paused for effect. “Because no one is.”


He went on to predict the cancellation of major events this spring and summer, then said, “What else do you want to talk about?”

He knew this was coming because of his extensive research, but very few others did. The COVID-19 pandemic is major to everyone, including the insurance industry in which I have spent my career. To be clear, I am not offering legal advice. I am also not trying to interject myself in current and impending claims. That is between you, your agent or broker and your insurers. I am starting a conversation, not ending it.

If you are counting on business interruption insurance to help you through this catastrophe, I potentially have some bad news. One basic tenet of business interruption insurance is that there must be a demise to the insured premises to trigger coverage. Common perils named are wind, fire, hail, riot, civil commotion, etc., and not all of those may be included in a given policy. Virus or pandemic would only be listed on very specialized, negotiated policies for risk managers who knew they faced these risks — cruise ship companies, for instance, or perhaps the Olympics. America’s primary insurance companies did not charge a premium for pandemic coverage, so it’s extremely likely that it won’t be covered.

Another somewhat more promising type of claim could be made if a “civil authority” has ordered your business to close. Normally, this kind of coverage kicks in when an emergency declaration closes down physical access to your business operation in select disasters, like tornadoes. If your policy includes “civil authority” language, experts are recommending businesses turn in claims to see what happens. It is an evolving situation, and is likely to be a process. My gut tells me that evolving public policy could play a role here, depending on what Congress does to help affected businesses. Terrorism premiums have been paid in to the insurance system since 2002. That’s 18 years of buildup of substantial funds, and it’s possible that money could be tapped. But some businesses paid for terrorism coverage while others passed on it. What happens then?

While you are considering what help your insurance may be, don’t forget to review the terms of your general liability and workers’ compensation policies. The Arkansas Insurance Department has wisely issued Bulletin No. 6-2020. Among other things, it provides 60 days of relief for policy cancellation for nonpayment of premiums for Arkansans diagnosed with COVID-19.

I have read that a few brave insurance carriers are crafting business interruption policies to cover future viruses and pandemics. My company is monitoring that closely. We’ll see if that idea gets off the ground, as terrorism coverage did after 9/11.

I hope this information proves helpful. America hasn’t seen anything like this since the Spanish flu a century ago. Googling that topic makes for grisly but informative reading. A pandemic has indeed happened here before, and we are much better equipped for it now.

I will leave you with these words from the great basketball coach John Wooden: “Do not let what you cannot do interfere with what you can do.”

Andrew “A.B.” Meadors is CEO of the Arkansas and Tennessee markets for Sunstar Insurance Group, based in Memphis.

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