Your Business Insurance May Contain Interruption Coverage You Can Use During COVID-19
Most entrepreneurs have general liability insurance coverage for problems that arise during the operation of their businesses. This is often used for situations such as a fire or flood at your office, or if someone gets injured on your premises.
What many business owners don’t know, however, is that their policies may also contain business interruption coverage. This can be a very valuable benefit if you are unable to operate your business because of something outside of your control. For example, we recently had a client whose office was closed for multiple days because the building’s HVAC unit went out, making the office unbearably hot and impossible to work at. Our client was able to make a claim against its policy and recoup some of the losses experienced during that outage.
This type of coverage can be incredibly important these days as many businesses are forced to close as a result of COVID-19. Some states are considering legislation that would require insurance carriers to cover business interruptions that occur as a result of the coronavirus pandemic. But until Illinois follows suit, you should review your individual policies to see what coverage you may have. Terms you may need to look for in order to determine if you have coverage are:
- Actual Loss Sustained. Some policies only cover losses where there is a direct physical loss or damage to the insured’s property. That may not be the case under some policies for health crises such as COVID-19.
- Period of Restoration. Insurers are generally only liable for coverage during the time period it takes to restore your business back–that is, to rebuild, repair, or replace your damaged property.
- Business Income. Business interruption policies generally do not cover lost revenue, but rather lost profits. In calculating how much benefit you may have, keep in mind that you need to consider what you would have netted after expenses. You may also, however, have some coverage for normal operating expenses, such as employee payroll.
- Contingent Business Interruption. Some policies also cover losses you incur as a result of not being able to obtain necessary parts or equipment from a supplier of your business. In this case, the policies generally require that your supplier have suffered the same kind of loss that would have been covered by your policy had it affected your business directly.
Understanding the ins-and-outs of your business interruption insurance is going to be especially important these days as we all try to work through the effects of COVID-19. Contact us today to discuss with us whether your policy covers a closure resulting from the coronavirus pandemic.
Charles is an attorney in Glen Ellyn, Illinois.After graduating from the University of Utah, he clerked for Chief Justice John T. Broderick of the New Hampshire Supreme Court. He then became a litigation associate at Kirkland & Ellis LLP before opening his own office and partnering with Rick Lofgren. He lives just outside of Chicago, where he participates in community activities, including Boy Scouts and little-league baseball.
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