Pub. 10 2020 Issue 4

22 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com Business Interruption and Related Insurance Considerations During the Coronavirus Pandemic M any business owners have become increasingly frus- trated by disputes during the coronavirus pandemic with their insurance companies over whether their commercial insurance policies and business inter- ruption insurance coverage extend to certain busi- ness losses. As a result, there is a significant uptick in litigation against insurance carriers by businesses whose claims include that their insurance policies cover losses sustained from state and local closure orders (“shutdown” or “stay-at-home”) during the pandemic. Generally, businesses assert that their policies should cover their business losses from pandemic-related closures. Insurers disputing coverage, however, assert that the policies only cover losses sustained due to direct physical damage to property and not to losses incurred from business disruption due to the public health crisis brought on by the pandemic. Additionally, some policies contain exclusions for losses resulting from viruses or pathogens, emboldening insurers to argue the general commercial property terms were not meant to cover these losses. In some cases, businesses have attempted to argue that the presence of COVID-19 on their properties caused them to close to sanitize and disinfect, resulting in direct physical harm to their properties. Others have asserted that government-mandated shutdowns have directly and negatively impacted their use of their properties. These claims, however, have resulted in vary- ing outcomes at procedural stages, with few dispositive rulings on the merits. How courts will ultimately rule in these cases remains uncertain. Dealerships should thoroughly review their insurance poli- cies and related coverages. Many dealerships may find that their commercial property insurance policy provides coverage to off- set their lost income and extra expense under certain coverages, such as business interruption, civil authority or extra expense. Business interruption coverage generally covers a company’s lost profits and certain continuing expenses following a covered loss (e.g., fire causing business to be closed for repairs). Such cov- erage might pay for the company’s loss of earnings or certain con- tinuing expenses until the business reopens. However, as noted above, coverage issues for this type of insurance arise because many policies cover lost profits and continuing expenses attribut- able, for example, to “direct physical loss or damage” to “insured property” at the “insured premises” caused by a “covered cause of loss,” These terms should be defined in the policy. If the policy contains a requirement that the loss is due to a “covered cause of loss”, some specific covered causes of loss may be listed (e.g., lightning, fire, etc.). Other policies may cover “all risks” of loss. As relates to COVID-19, it may be easier to obtain coverage under an “all risks” policy than one that covers specified causes of loss. COUNSELOR’S CORNER