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Business interruption insurance is normally designed to compensate business when hurricanes, floods, fires, and other natural disasters occur. While the COVID-19 pandemic is most certainly a disaster, there are questions about whether business losses due to the coronavirus are covered since business insurance coverage is usually an add-on to property damage coverage.

For now, coverage for COVID-19 business interruption depends on the exact type of business insurance coverage you have and the exact wording of the policies. A major factor is the wording of the exclusions. If pandemics and viral infections aren’t specifically excluded, a legal claim may be possible. Another factor is whether the policy is business interruption insurance which normally requires physical damage or civil authority insurance which can cover any type of danger pursuant to government orders.

As the pandemic continues and the realization that new pandemics may follow the COVID-19 pandemic, businesses of all types need to consider their options. The options will generally apply to new diseases and not the current COVID-19 health crisis.

Without insurance to cover the inability to pay employees, to pay overhead, and to run a business, many businesses in Illinois may face bankruptcy unless the state or federal governments provide assistance.

According to CNN, many companies are seeking business interruption insurance for future disasters. Much of the details about insurance offered depends on the risks the insurance companies are willing to insurance and the amount of premiums they’ll need to charge to cover the risks. It’s currently difficult to assess the risk and severity of any pandemic which is why so many insurers exclude pandemic coverage. According to Metabiota CEO Nita Madhav, coronavirus “outbreaks could happen once every 25 to 50 years, with other disease outbreaks occurring more frequently.”

What is parametric insurance?

Parametric insurance uses metrics to determine whether business interruption damages should be paid. Traditional indemnity insurance policies are used for traditional risk-based policies.

An example of parametric insurance is when an insurer agrees to pay a hotel if their occupancy rate dips below a specific level (such as 50%) for a specific duration (such as two weeks or more).

One company, Munich Re, underwrote a parametric policy called PathogenRx, which could have been used to pay for COVID-19 business interruption losses – but no businesses bought it. It is expected that any future PathogenRX or any other parametric policies will specifically exclude COVID-19.

Civil authority clauses and policies

This is a policy which may be effective when businesses cannot access their business due to orders by local governments, state governments, or the federal government. These policies though, will likely specifically exclude COVID-19. They may not exclude other viral infections.

Event insurance clauses and policies

This type of business interruption insurance pays damages if an event has to be cancelled due to a pandemic. This year, Wimbledon will receive nearly $141 million because its tournament was cancelled due to COVID-19. The premiums were about $2 million a year..

At Gainsberg Law, our Chicago business interruption lawyer understands how devastating the COVID-19 crisis has been and will continue to be for local businesses – restaurants, hotels, retail workers, and many other businesses. We are keeping current with the insurance legislation that may help businesses and are ready to review your business interruption insurance policy to determine if coverage is due. For help with business interruption insurance policies and claims throughout the Chicagoland community, call us at 312.313.1621 or complete our contact form to schedule an appointment.


Text Us312-600-9585