Earlier this week, the California health department estimated that nearly 700 residents had contracted Coronavirus. According to some estimates, more than half of the state — 25.5 million people — will get the new coronavirus over the next eight weeks. Just yesterday, California Governor Gavin Newsome issued a statewide order for all California residents to stay at home in order to “flatten the curve” and slow the spread of the virus.
As a result of the order, all dine-in restaurants, bars, clubs, gyms and fitness studios will be closed for the foreseeable future. Public events and gatherings are also not allowed, according to the order. However, essential services will stay open, however, such as pharmacies, grocery stores, takeout and delivery restaurants, and banks.
The order will remain in effect until further notice, however, business owners and workers alike are wondering when they will be able to resume normal business operations. For many, the Governor’s order to stay at home will cause a significant interruption to their business, leading to substantial financial loss.
There are instances in which insurance policies cover losses associated with business interruptions caused by a direct physical loss by a covered peril to your property. However, most insurance policies will not cover costs stemming from widespread shutdown due to a pandemic outbreak.
Insurance, by design, is meant to spread the loss of the few among the many. This is what makes insurance affordable to all business owners. A pandemic, like COVID-19, where potentially every other carrier could face business disruption is generally an uninsurable scenario.
Some may argue that COVID-19 contamination of physical objects like HVAC systems or assembly lines could force businesses to cease operations. In such situations, business interruption insurance could be triggered and provide some protection from financial loss. As with any loss, the wording of your insurance policy will determine how your insurance carrier responds to your claim.
This may provide little comfort for business owners who are worried about keeping their business alive as the State of California rides out the COVID-19 pandemic.
COVID-19 raises a number of liability concerns for businesses, particularly if guests, customers or employees allege they became sick due to a business’s negligence. General liability insurance will protect your business from financial loss if you are found liable for property damage or personal injury caused by your services, business operations or employees.
When it comes to COVID-19, general liability policies may provide coverage and allow you to defend claims against your business. In order for a claim to be valid, however, the person making the claim would have to allege the virus was contracted due to the your business’s negligence and provide details on how, when and where they got sick, which may be difficult to prove.
If an employee believes they contracted COVID-19 at work, workers’ compensation may come into play. Communicable and contagious diseases are generally excluded from workers’ compensation policies, however. In the case of COVID-19, workers’ compensation coverage may be triggered if the illness arose due to or in the course of the worker’s employment. In general, these types of scenarios are examined on a case-by-case basis and may not be applicable.
If your business is suffering from an economic loss caused by the Coronavirus, there are other options available to you. For example, the U.S. Small Business Administration is providing disaster assistance to businesses affected by the Coronavirus. SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for a small business. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. In addition, there are many small business grants on both the state and federal level that business owners can apply for.
That being said, every business owner’s situation is unique. The events that have caused disruption to your business may be covered by your insurance policy. In some cases, a third party may be responsible for economic damages incurred by the interruption. If you have questions about insurance or liability issues related to COVID-19, please call our office for a free consultation.
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