While the COVID-19 pandemic was a genuine global health risk, it was also an unprecedented economic disaster. At the height of the pandemic, governments worldwide enacted shutdowns to prevent the spread of the virus. While they helped, the measures also hurt businesses in the retail and hospitality spaces since the restrictions prevented customers from visiting, resulting in lost income.
The pandemic may have largely subsided, but the threat of the next big pandemic has many business owners understandably worried. On paper, insurance can help in this regard. After all, business interruption insurance can cover most business losses – but can it cover losses related to future pandemics?
What are insurance exclusions?
The first thing you must remember regarding insurance policies is that they usually have exclusions in their terms – things the insurer can’t pay claims for. Unfortunately, viral outbreaks have been a part of most insurance exclusions for some time.
Insurance companies used to be able to pay for losses related to viral and bacterial infections, but the SARS outbreak in 2003 led to massive losses for global insurers. Since then, insurers have excluded communicable diseases from their business interruption insurance policies.
The American Property Casualty Insurance Association has also advised that business interruption insurance typically covers losses only when there is “direct physical loss or damage,” which means some insurers might argue that a virus has not caused physical damage to a business to justify denying a claim.
While the insurance industry has made a strong case for why it can’t pay for pandemic-related business interruption claims, that doesn’t mean you can’t try.
How can policy language work to my advantage?
If you’re appealing an insurer’s denial of business interruption coverage over virus-related losses, you might want to review the language within your policy. If there is a specific exclusion for viruses in the policy, it might be difficult to appeal your insurer’s denial – but if there isn’t, you might have a fighting chance. Some insurers may have specific exclusions for losses related to bacteria, fungi, or mold growth, but this can’t apply to viruses.
The National Association of Insurance Commissioners has recommended that you consult your insurer or agent to better understand specific exclusions in your policy.
Nobody knows when the next global pandemic will hit. Still, before another health catastrophe happens, you should carefully review the language of your business interruption policy to understand when coverage triggers. And should you find yourself in a position where your insurer denies coverage, knowing what’s in your policy could give you an edge during the appeal process.