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Opinion: FAQs about insurance coverage

While the current COVID-19 pandemic continues to gain traction, many insurers and insurance brokers have fielded and are still fielding calls from their policy holders. The main question in the majority of those calls is whether the business interruption coverage on their individual policies will provide protection for their loss of business income.

Business interruption coverage was never designed to provide coverage for a viral pandemic. Typical business interruption coverage responds to the insured premises suffering a direct physical loss or neighbouring premises suffering the same and rendering your premises unfit for occupancy and/or use. There are some cases/instances of infectious disease extensions of coverage, but these typically refer to the disease originating at the insured premises and, again, causing direct physical loss to that insured premises.

Many insureds have enquired about the “civil authority” clause or the “restriction of access” clause in their policies too, and are wondering whether these endorsements will provide them with the coverage they are asking for. At this time, it’s important to note that the intent of these clauses is for an insured premises suffering a direct physical loss, requiring restricted access or civil authority shutdown of the insured premises.

Some consumers and clients are suggesting that insurance companies should be asked or mandated to cover these loses due to the outbreak/pandemic, mandated closures and shutdowns. Some have even suggested that government authorities legislate or force insurers to provide coverage for these income losses. This is not how insurance policies and wordings have been designed, and it is important to note that insurance was never designed or intended to cover all forms of risk. It is simply not possible.

In its simplest explanation, insurance was designed to provide coverage by pooling risk. It is, in essence, the idea of the contributions of the many offsetting the losses of the few. Everyone pays a premium, the insurer invests that premium, and then pays for a number of reasonably predicted claims from the total premium dollars (and modestly invested income) collected. This is all possible because many policy holders pay into the pool and a small and predictable number of policy holders face losses, which most often result in some form of property damage and/or injury.

As we’re all aware, this pandemic is a global crisis, which will take, quite literally, everyone working together at all levels to combat it. Although in most instances there will be little or no coverage available from your insurance policy for this particular matter, many insurers are still responding where coverage is applicable, and are offering other forms of assistance where they can.

Be sure to contact your insurance broker to see how your insurer might be able to assist you. Also, be sure to be informed about what type of relief or assistance might exist from any government relief aid, or package, for your business or employees. Lastly, but most importantly, keep healthy and safe.

Stephen Bleizeffer is vice-president and partner at Lackner McLennan Insurance Ltd.