Many businesses are experiencing disruption due to the COVID-19 pandemic and you may be wondering if there is any opportunity to offset this exposure. Here are a couple things to look for as far as your business contracts and insurance coverage:
Many contracts will have a “force majeure” provision that may postpone, extend or even excuse performance due to acts reasonably beyond your control. This provision may further specifically call out an act by a civil authority or intervening change in law.
In other words, your contract may give you an out as far as performance or liability for non-performance due to COVID-19, as long as you comply with any related contractual requirements, such as notification and loss mitigation steps (keep in mind, this can also be a double-edged sword since the language is often mutual).
You should generally have insurance coverage for an interruption to your business resulting from an act or order by a civil authority (typically found in your commercial property policy). HOWEVER, coverage may only exist where physical damage to your property is involved. Significantly, many (if not most) policies will explicitly exclude coverage for losses resulting from a virus, bacterium or other microorganism.
In other words, you will likely be denied coverage for business losses related to a closure or disruption due to COVID-19. Given the expected number of overall claims interpreting the interplay between civil authority coverage and virus exclusions, the default position of insurers will likely be denial of coverage.
Of course, different contracts and insurance policies may have different provisions that may be more (or less) favorable to your position. Hopefully the above gives you some ideas and helps manage expectations as you navigate these difficult times. As always, we’re here to help.