The COVID-19 virus is here, and Shelter-In-Place orders have been issued in Michigan (and most states), requiring businesses to shut down. Many business-owners have commercial insurance policies with coverage for loss of business income. However, these generally apply to situations in which “direct physical loss or damage” to property requires the business to suspend its operations while repairs are completed.
Are business income losses caused by a pandemic covered? In Michigan, the answer will likely vary from case to case. As with most coverage-related issues, whether an insured will be able to recover for such losses will depend on the policy language, including: (1) whether it initially affords business income coverage; (2) if so, whether an exclusion eliminates that coverage. These questions must be assessed in the context of Michigan law. With respect to the coverage afforded, Courts will first have to address causation issues (i.e. whether the loss was caused by COVID-19 or the Shelter-In-Place order) to determine which policy language applies. If the virus is the cause (as opposed to the order), does the presence of COVID-19 constitute “physical loss or damage”? Cases from other states imply that the answer is yes (see Gregory Packing v. Travelers, Civ. No. 2:12-cv-04418 (11-25-2014)), but the issue has yet to be addressed by the Michigan courts in the context of COVID-19. If the order is the cause of the loss, whether the policy covers “government action” or provides “Civil Authority” coverage will become an issue.
Even if the policy's coverage is broad enough to encompass business income losses from COVID-19, insurers may claim the policy exclusions bar coverage. Some policies specifically exclude coverage for "governmental action." Others bar claims for losses caused by “Fungus, Wet Rot, Dry Rot And Bacteria,” but do not list viruses. While these exclusions might bar BI losses caused by the Black Plague (a bacterial disease), they would not bar losses caused by COVID-19 (a virus) so the exact language is critical.
Of course, many insurance adjusters will be happy to volunteer their opinions regarding whether business coverage exists. However, if these losses are covered, insurance companies face enormous potential liability, so that opinion will often be "no." If you have a COVID-19 related loss, we suggest that you not treat the adjusters assertion that there is no coverage as the final word. Instead, if you can decipher the policy (which is difficult for many attorneys), read it carefully. If, as is the case for most people, it seems like a confusing mess of legalese, get help. In either event, you should move quickly, if only to have an attorney who understands insurance look at your policy to determine if: (1) you have a potential claim; and (2) any important deadlines are approaching (see Proof of Loss post below).
We at McCray Law Office can't guarantee that coverage exists for COVID-19 related losses of business income. However, if you have suffered a significant loss, we would be happy to discuss your claim. There is no fee for this (or any) initial consultation. We are still working our usual hours during the pandemic and are available by phone and email.