How COVID-19 impacts your business insurance
The Government of Ontario has enforced non-essential businesses to temporarily close as a response to the rapid spread of the COVID-19 pandemic, making it hard for some businesses to continue paying for unavoidable expenses such as rent and salaries. Business owners might be wondering whether their business insurance policies would cover lost revenue due to forced closure. Insurance companies have been giving answers and these answers depend on the type of policy your business has. The short answer is that your policy may or may not cover you. Here is a list of the common types of business insurance coverage, what they protect, and whether or not they could protect your losses caused by the COVID-19 outbreak.
What it does: Property insurance generally covers loss or damage to your building, stock, equipment, furniture, upgrades, and your business contents. Property insurance includes a feature called business interruption coverage which covers loss of revenue and additional expenses incurred due to forced business closure caused by property claims, such as flood, windstorm, earthquake, or fire.
Impact of COVID-19: You might be wondering whether the business interruption coverage applies during the COVID-19 pandemic. Unfortunately, even though it has forced your business to temporarily cease operations, the coverage typically only kicks in if there is a property damage claim first. The reason behind this is that interruption coverage is designed to protect your business from physical property damage. A few policies though, usually those that cover large-scale businesses, specifically mention coverage for infectious disease. Although this case might be rare, this type of policy would likely cover losses due to COVID-19 forced business closure. Please contact our office or your insurance broker to review your policy.
The other component to consider is your location or business premises. Your location may be vacant now due to the government mandate, and this could impact your coverage. Be sure to contact your insurance broker to let them know if your location has been vacant, to ensure that the vacancy endorsement is added to your policy. Insurance brokers as a whole are working with insurance companies to enforce the vacancy endorsement is automatically added to all policies.
Commercial General Liability (CGL)
What it does: Commercial General Liability or CGL is designed to protect your business against lawsuits for injuries and property damage caused by the company’s products, operations, or injuries that occur in the business’ premises.
Impact of COVID-19: This section exists to protect your business from claims made against it by a third party. As such, there is no connection to loss of revenue caused by forced closure of your business due to COVID-19. If, for example, a visitor or customer catches COVID-19 on your business’ premises and they decide to sue your business, your CGL insurance could potentially cover your business against such a lawsuit.
Contingent & Business Interruption Insurance
What it does: Contingent Business Interruption or CBI protects you from revenue losses and continuing expenses caused by one or more of your company’s suppliers’ or customers’ insurable loss. This also covers losses in the event that an incident in your area prevents your customers from entering your business premises.
Impact of COVID-19: Since this coverage typically requires physical damage to a third-party’s property, it is unlikely that it would cover losses due to the COVID-19 pandemic. Similar to the business interruption described above, a property claim is the trigger for business interruption claims that can arise thereafter. Remember that all policies are unique so if you would like to review your policy’s stipulations in the event of a pandemic, you may contact your broker.
What it does: Cyber insurance is designed to protect your business against identity theft, phishing, hacking, and other cyber crimes. If a hacker steals your clients’ sensitive data or takes over your network, aside from having to pay for recovery costs, you would also be held liable for the incident. Cyber insurance protects you from both.
Impact of COVID-19: Currently, a huge number of employees are working from home and using their personal devices. This leaves employee systems and customer data the most vulnerable to cyber attacks. If their personal devices and networks are not covered by your policy, your insurer may not cover possible losses. You may contact your broker to review or update your business insurance to make sure that everything is covered given the current situation.
We would like to reiterate that each policy is unique and that the situation is continuously evolving. For this reason, we recommend that you review your policy together with your broker. You may contact your PrimeService broker anytime at 905-886-7277.