As thousands of Alberta businesses have been shut down for nearly two months now, a question we are hearing often from our clients during the COVID-19 pandemic is whether or not they can access their business interruption insurance. The name “business interruption” seems to denote that this type of coverage would be accessible during this time, but unfortunately policy-holders are discovering it is not.
Business interruption insurance does not provide coverage for loss of business or supply chain disruption due to situations such as a pandemic. Stipulations around business interruption insurance generally require that there be direct physical damage stopping the business from being operational. Some examples of situations where a business interruption insurance claim may be include:
- Power outages and blackouts where products and/or equipment are damaged
- Fire damage, either at your facilities or at the facilities of a key business partner or supplier
- Property damage from an incident such as vandalism, either at your facilities or at a location that you need to access as part of your business operations
- Loss or destruction of important intellectual property and proprietary goods or information, potentially because of an employee or a cyber criminal
- The illness, injury or death of a key business principal
- Equipment failures, breakdowns, sabotages, or thefts
How Does Business Interruption Insurance Work?
Business interruption insurance is an optional supplement (sometimes called an “endorsement” or a “rider”) to regular business property insurance. Your property insurance is specifically designed to protect the physical assets of your business, which includes your products, buildings, equipment, electronics, furniture … the list can be very long!
Property insurance comes in two basic policy types:
- Named perils, which covers for loss and/or damage only by named perils in the policy. Loss and/or damage caused by any other means are not covered.
- Comprehensive, which covers for loss or damage from any perils unless excluded
Examples of “perils” included in policies are incidences such as:
- Impact from an aircraft or vehicle
- Electrical current
- Explosion
- Falling objects (excluding those as a result of a snow slide or movement of the earth)
- Fire
- Lightning
- Smoke from malfunctioning cooking or heating devices, but not from fireplaces
- Theft
Common exclusions on business property insurance policies include:
- Flooding (may be covered by additional water damage insurance coverage)
- Sewer back-up (may be covered by additional water damage insurance coverage)
- Water damage (may be covered by additional water damage insurance coverage)
- Earthquakes
- Mould, fungi, and spores
- Unpreventable damage caused by the freezing of pipes
- Terrorism and war
You’ll notice this both of these lists do not include anything health-related. Business property insurance covers just that: property. There are no contingencies for anything like COVID-19 currently included in property insurance for businesses.
Types of Business Interruption Insurance Policies
In Canada, there are three types of business interruption insurance policies:
- Gross earnings policies, which pay up until the property is repaired or replaced.
- Profits form policies, which will pay until a business resumes its regular operations.
- Extra expense policies, which will cover to help keep businesses operational during periods affected by loss.
Business interruption insurance policies are not standardized, which is why many businesses are discovering they are not covered to the extent they thought they were. In general terms, they will pay for loss of business income because of the necessary suspension of operations.
If you need clarification on your business insurance during the COVID-19 pandemic, speak to your insurance provider or your broker. Don’t forget that in addition to business property insurance, coverage for businesses also includes liability insurance.
Could Business Interruption Insurance Change Because of COVID-19?
Due to the extent of the pandemic and the incredible pressure placed on businesses, some experts believe that there could be a case to include situations such as the COVID-19 pandemic in business interruption insurance. Arguments that the pandemic actually does cause physical damage means that arguments about the definition of physical damage are likely to ensue, possibly under the umbrella of “contamination.” As is common with insurance, the specific language of each policy will determine whether a claim will be paid out.
Business Insurance in Alberta: Trust Lane’s Insurance for All Your Coverage Needs
There are additional supports available for businesses in Alberta if you are struggling, including requesting insurance payment deferrals, deferred property tax payments, and deferred utility bill payments.
If you didn’t opt in for business interruption insurance when you bought your general business insurance policy, it is coverage that can be easily be added. It’s a good idea to talk to your broker about your specific needs before making any final decisions.
The expert brokers at Lane’s Insurance are standing by to help you with all your business insurance coverage needs, including:
- Contract surety bonds and commercial surety bonds
- Contractors’ insurance
- Oil and gas insurance
- …and much more
As a brokerage, Lane’s Insurance works for you, not for the insurance providers. You’ll get impartial advice that protects your best interests, along with the most competitive rates on the market. Get started today by contacting a Lane’s Insurance representative.
