As California’s “shelter in place” Order enters its third full week, RPNA has worked closely with numerous business clients to plan their legal needs for the difficult times ahead. One of the questions RPNA is getting a lot is, “Do I have insurance coverage for this?” For those businesses that have purchased “business interruption” coverage, they may in fact have such coverage.
This coverage is normally purchased as part of a property damage policy or as part of a business’ more comprehensive insurance package. Most generally, it is designed to cover a business’ loss if its operations are wholly or partially shut down because of “loss or damage” (or similar language) to property on site. Business interruption policies generally also contain a provision called “Civil Authority” coverage. This provision pays business losses if access to the business is limited or prohibited by an order of a government official or agency due to loss or damage to property offsite but within a specified geographic radius.
The primary legal question is whether the current COVID-19 crisis is causing loss or damage to a business’ property or nearby properties. A business owner researching this issue on the internet will find this question, for the most part, answered in the negative. However, most of the articles addressing the issue to date are coming from the insurance industry itself or the lawyers who represent it.
While California courts haven’t yet had the opportunity to rule whether COVID-19 is a cause of property damage, the good news is that courts throughout the country have found property loss or damage in similar circumstances. For example, courts have found property damage caused by ammonia leaks, gas seepage, odors, asbestos, and in other situations where a condition has not directly damaged the structure of a property (as a fire or explosion would), but has otherwise rendered a business structure unusable – as may be true in the case of the current pandemic.
As with other forms of insurance, whether a business interruption claim is covered or not depends on a number of factors, including the specific words used in the coverage form, the extent to which it can be determined that COVID-19 has caused damage to a business’ property (for example, whether customers, visitors, or employees have been exposed, are carriers, or have been diagnosed), and other fact-specific issues. Further, some policies, but not all, have exclusions for damage caused by viruses.
Business owners should not try to make this determination on their own, and especially not judge whether to make a claim based on what they read on the web. We are already working with clients to evaluate their business interruption coverage, and we encourage our clients to contact us with questions.
Please contact Nick Roxborough at (818) 992-9999, ext. 222, or Vince Gannuscio, at ext. 221.