The global spread of the Novel Coronavirus has shuttered businesses around the World, whether through illness, lack of business, or government mandate. The economic impact is already severe and it is fair to say that the road ahead is uncharted.
Here in the U.S. Virgin Islands, the local Government has already mandated the closure of non-essential businesses. That includes, by the way, law firms like this one. While lawyers can work from home, the same may not be true for your business. One lifeline for your business just might be right there in your insurance policy.
Business Interruption Coverage (BIC) is an insurance product that may be paired with Commercial Property policies. Insurance industry numbers suggest that about one-third of small businesses do have some type of BIC. As an example of how BIC works, one local client suffered a major fire at their store during off-hours. The damage was so severe that the store was closed for about three months afterwards while the premises was gutted and rehabilitated. That was three months of employee payroll and loss of sales for the store.
In that instance, the business had BIC as part of their Commercial Property Policy. The BIC kicked-in to cover the lost business income -- typically defined as something like, “the net income (net profit or loss before income taxes) that would have been earned or incurred by the insured and the continuing normal operating expenses incurred, including payroll.” In the instance of my fire-damaged client, they were able to establish through business records what payroll they paid during the closure, as well as historical documents showing what the business had made in prior months. As a result, they were able to recover a large percentage of what they would have otherwise earned.
Can your business do the same if closed because of the Coronavirus pandemic? Like so many legal questions, the answer is a firm maybe. The language of your particular insurance policy controls. Following the 2002-04 SARS outbreak, many insurance companies around the world began to adopt language which excludes BIC for any “loss due to virus or bacteria.” Some jurisdictions have specifically introduced legislation which would relax those exclusions but insurers, as you may imagine, are fighting hard for those clauses to remain in place.
The fact that these virus exclusions do exist should not keep you from examining your policy to see if BIC or some other avenue for coverage exists under the current exigent circumstances. Not all insurance policies are the same – and jurisdictional laws do vary. These are difficult times for businesses and having a great business lawyer on your side is a valuable tool to battle the uncertainty.
If you need help deciphering your insurance policy or have any questions on business interruption insurance or how your business might have a claim, please call for Mark at 340-774-4547 or send him an email at mark@usvilaw.com.