Know Your Insurance Coverage Before a Pandemic Destroys Your Business

A Back to Business Article

By Bart Higgins, Principal, Shields Legal Group



Large and small businesses are dealing with the fall-out from Covid-19. At Shields Legal Group, we want to give practical, actionable steps for you to take inside your business during the Covid-19 pandemic. That’s why we created Back to Business, a place where you can go to learn more about navigating these uncertain times.


Today’s focus is on your insurance coverage and what claims you could make to help your business during this uncertain time.


Covid-19’s Impact on Business is Unprecedented

As each day passes with Covid-19, the loss to businesses and the economy are staggering.

As a comparison, Hurricane Katrina generated over 2 million claims and caused more than $40 billion in property and business interruption losses.

The September 11th terrorist attacks resulted roughly $20 billion to $21 billion in insured property losses. Insurers will pay an estimated in excess of $35 billion by the time all claims are resolved.

The losses from natural disasters such as hurricanes or terrorist attacks will be dwarfed by the economic and human losses caused by Covid-19. It has been estimated that a severe pandemic could cost the U.S. economy anywhere from $100 to $200 billion, and economies worldwide could suffer a per year total loss of approximately $800 billion with a potential loss of 2,000,000 lives.

Now is The Time to Review Your Insurance Policies

If you are own a commercial property or a business that has been impacted by the current pandemic, it’s time to look at your insurance coverage.

The first step in the insurance dance is to understand the coverages you purchased, not the coverages you assumed would be included.

To avoid being reactive and to stay proactive, the company’s owners, general counsel, and risk manager must understand what type of policies might provide coverage for claims arising from pandemics.

· For example, are there coverages that are triggered by government orders to cease business?

· Have you experienced supply chain issues because of the global shutdown? You may have coverage for those losses.

· Does your company have Director & Officers Insurance that could be invoked if your Board of Directors is blamed for damages caused by the shutdown?

When you are reviewing your insurance policies, pay attention to all exclusion clauses and any relevant business contracts to determine whether they mention pandemics, epidemics, or governmental shutdowns.

Concerning your employees, what does your worker’s compensation insurance provide for claims made because of a government shutdown? How is your company’s sick leave policy impacted?

It’s important to know the difference between business-interruption insurance and property insurance. Business-interruption insurance protects the insured from losses sustained during periods of suspended business operations caused by a covered peril to a specific property or location. Property insurance covers actual physical damage sustained to the insured’s property.

Unfortunately, because the standard business interruption insurance requires physical damage to the covered property, it will not cover business losses sustained from a pandemic.

If your company manufactures goods that require materials to be purchased from another state or outside the country, determine if you have contingent business interruption insurance. These policies kick in when a business operation is disrupted from events outside of the insured’s control. This type of insurance covers economic losses and increased costs of operations resulting from physical damage to property at a named or unnamed customer, supplier or business partner. You will need to show physical damage or contamination to the property. This coverage is broader than your typical business interruption because a loss resulting from a supplier or customer’s bankruptcy, from a civil riot, failures in transportation or failures at their plant may be covered.

In Summary:

Review all insurance policies purchased to protect your company to determine if a claim can be made. Look for provisions or terms that mention “government shutdown” or “civil authority.”

Also, review the exclusions contained in the policies to make sure they don’t apply to your particular situation. If you use an insurance broker, ask them to guide you through the policy reviews and ask questions about the policies.

You need to know the coverages you paid for, what triggering events are necessary and what damages the insurance company will reimburse. Knowledge is power and can help remove the uncertainty that exists now.

Let’s Get Back to Business


The world of business has drastically changed in the last several weeks. That’s why we created Back To Business, to share our knowledge and expertise so you and your business can survive.


Thank you for being part of Back to Business.


As we continue to navigate through these uncharted waters, please visit Back to Business. We have created videos that share valuable information and practical tips on what to do during this time.


Shields Legal Group is here to help you and your business recover from the impact of Covid-19.


Be safe. Be well. Be healthy.

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We work with you in developing the right legal strategy for your business. Engage us with confidence – contact us today.

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