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Navigating through Covid-19 insurance

Business Interruption coverage for Covid losses to be tested at the Supreme Court.

Henderson Road Restaurant System, which operates 16 restaurants in several US states sought coverage from Zurich American Insurance co. for lost business income resulting from various government shutdown orders that temporarily prohibited the restaurants from providing in-person dining, which comprised nearly all of the restaurants’ pre-pandemic business.

Henderson argued that it was entitled to coverage under the policy’s business income coverage, which insured against a suspension of operations due to a fortuitous event causing “direct physical loss of or damage to” property. Because the insurer did not contest that the restaurants had suffered a loss of business income, the court needed only to decide whether the suspension resulted from a fortuitous “direct physical loss of or damage to” property—a phrase undefined in the insurance policy. Zurich is expected to appeal the decision to the Ohio Supreme Court.

Many businesses are reviewing their insurance policies to determine whether insurance coverage is available to recover losses related to the 2019 novel coronavirus disease (Covid-19), including:

  • Lost profits and other lost business income;
  • Extra expenses incurred because of Covid-19;
  • Property damage caused by Covid-19;
  • Amounts they may have to pay to third-parties for COVID-19 related personal injury or property damage for which the business is allegedly liable.

Lessons Learned

  • Commercial Insurance must be reworded by experts independent of insurers and brokers;
  • There is no value in paying insurance premiums for years and not getting meaningful payouts during large loss events;
  • Initiating a lawsuit against an insurer is costly and defeats the purpose of buying insurance.
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