Insurance policies do not cover declining business, lack of sales or profits. However, sometimes a business is forced to shut down temporarily as is the case because of sanitary measures enforced by the government in relation to COVID-19. In these cases, some insurance coverage deemed as “business interruption” might apply.

Generally, this type of coverage insures against a business loss income due to a covered event such as a fire. Normally this type of insurance requires that damage to an object is observable such as physical damage or direct physical loss. Insured businesses will argue that contamination by COVID-19 is obviously physical and should be sufficient to qualify. Insurers will argue differently as to what qualifies as physical loss. Depending on the policy language, coverage might include losses due to forced restrictions set by the government.

Since the SARS crisis in the mid- 2000s, some American “all risk” insurance policies started to include specific exceptions for viral outbreaks. Most Canadian policies do not include this type of exception and will probably give rise to Court cases against insurers as to the definition of “all risk” in their policies.

Since the beginning of COVID-19 many companies have been forced to restructure and in certain cases, restructuring professionals have been successful in filing insurance claims under a “business interruption” clause, after reviewing their policies.

It is evident that there will be number of lawsuits against insurers as the Courts re-open for normal operations resulting from the interpretation of the various policy clauses. Business owners, with the help of their professionals and insurance brokers, should review if there is a potential insurance claim under their insurance policy for COVID-19. All will depend on the wording of the policy itself, and its interpretation.