Will Insurers Cover Business Losses From COVID-19?

As restrictions start to lift, a big question of agen poker remains: Will governments and lawsuits force insurance providers to cover businesses’ coronavirus-related losses?
The COVID-19 pandemic has pushed many small business owners to the financial brink. Mandatory shutdowns have slashed their revenues, while local regulations are forcing them to spend more to super-clean their businesses and provide enhanced safety measures for their employees and customers. Even as states reopen their economies, many business owners are still forbidden from operating at full capacity, adding further economic strain to their suffering balance sheets.

When these business owners have turned to their business insurance policies for financial relief, many have found that their insurers aren’t paying out, even if these owners have been spending on business interruption insurance for years. Can these business owners expect any financial relief from their insurance providers?

Unfortunately, the answer is complicated. State and federal legislators are looking for ways to require insurance companies to provide payouts for business owners who have invested in business interruption coverage. None of these measures have passed yet, though, and lawsuits filed on behalf of business owners are still in their early stages.

This suggests that business owners would be best off filing coronavirus-related claims anyway, in the hope that their insurers will provide at least some financial relief. Even if they don’t, these business owners will at least have their claims on file in case legislative or legal efforts do eventually force insurers to start paying out.
The COVID-19 challenge
How difficult has life been for small businesses during the pandemic? In the latest MetLife & U.S. Chamber of Commerce Small Business Coronavirus Impact Poll, released in early June, 82% of small business owners said they were concerned about the impact of the pandemic on business, with 43% saying they were “very concerned.”

In the same poll, 55% of small business owners said they think it will take six months to a year before the U.S. business climate returns to normal. That is up from 50% who said the same thing in May.

To make life even more difficult, insurers have largely refused to reimburse businesses for the losses they’ve sustained during the government-required shutdowns.

Why aren’t insurers paying out?
Insurance policies, even those boosted by business interruption coverage, typically don’t cover losses related to pandemics. Insurance companies argue that the costs of pandemic coverage would be so great that they wouldn’t be able to cover them without suffering significant financial losses.

Much of their argument concerns the issue of physical losses. Insurers say that business interruption policies only provide coverage when businesses suffer an income loss because of actual physical damage. A policy would pay out, for instance, if a business suffers damage from a fire or flood and must shut down to make repairs.

But COVID-19 shutdowns were not the result of a physical loss. Because of this, insurers say they don’t have to pay up even if owners have been paying for a business interruption policy for years.