Business Interruption coverage is optional coverage that may be purchased as part of Commercial Package Policy, a Businessowners
Policy (BOP), or as a standalone policy. Business Interruption coverage usually will provide for loss of net income, as defined by
the policy, and extra expenses incurred to return your business to normal operation. Business Interruption coverage may be covered
on an “all risk” basis subject to exclusions or it may specifically list types of perils or causes of loss it covers. Business
Interruption coverage is typically triggered if you have direct physical loss to covered property that leads to the business
interruption – for example, a fire at your location that has caused you to suspend your business activities.
How do I know if I have Business Interruption coverage?
Business Interruption coverage is usually an optional coverage. You will need to consult your policy to see if you purchased this coverage. The Department of Insurance strongly encourages businesses to review their policies, including the conditions, exclusions, coverage limits, and applicable deductibles, with their insurance agent or company to determine what their policies cover. Each insurance policy is different, and the coverage varies.
Are all Business Interruption policies the same?
No. Business interruption coverages in commercial property and business owner policies contain different terms and conditions impacting how business interruption will be covered, what will be excluded, and how endorsements might alter the coverage in the base policy form. Because the terms and conditions are worded differently among insurers, it is critical for all business owners to read the specific terms and conditions set forth in their policies.
Will my Business Interruption coverage pay for losses as a result of COVID-19?
You would need to consult your policy to determine what is covered, but in general, Business Interruption coverage requires a direct physical loss or damage to covered property caused by a covered peril (i.e. fire, water damage, etc.) in order to trigger the coverage.
What if my business is closed due to an order of the state or local government?
In some cases, business interruption coverage contains a “civil authority” clause. Like other business interruption coverage, this clause may require physical damage to property caused by a covered peril, but not necessarily the insured’s property or at the insured location. Dependent on the specifics of a given policyholder’s situation and policy language, there may be coverage for closure of the business because of an action by a governmental entity (a "civil authority") because of health and safety concerns, so long as the covered physical loss or damage has occurred.
What should I do if I think I have Business Interruption coverage for lost business income as a result of the COVID-19 pandemic?
File a claim with your insurance company. Your insurance company will either accept the claim or deny it. If, after reviewing your policy and consulting with your insurance agent and/or legal counsel, you believe you have been improperly denied Business Interruption coverage by your insurance company, you can file a complaint with the Department at (208) 334-4319 or (800) 721-3272 or at doi.idaho.gov/consumer/
Why do most business interruption policies exclude coverage for viruses or communicable diseases like COVID-19?
The National Association of Insurance Commissioners (NAIC) recently issued a statement regarding business interruption coverage. The statement explained:
Business interruption policies were generally not designed or priced to provide coverage against communicable diseases, such as COVID-19 and therefore include exclusions for that risk. Insurance works well and remains affordable when a relatively small number of
claims are spread across a broader group, and therefore it is not typically well suited for a
global pandemic where virtually every policyholder suffers significant losses at the same
time for an extended period. While the U.S. insurance sector remains strong, if insurance
companies are required to cover such claims, such an action would create substantial
solvency risks for the sector, significantly undermine the ability of insurers to pay other
types of claims, and potentially exacerbate the negative financial and economic impacts
the country is currently experiencing.
I have already talked to my agent/company and still have questions or concerns. Can I contact the Department of Insurance?
If your question is not answered above, please submit your question directly to the DOI.