Business interruption insurance: Are you covered?

As an astute and responsible chief executive officer, you have developed and implemented the perfect plans to ensure uninterrupted efficiency and success for your business.

Unfortunately, however, sometimes the world has other plans that could stymie your best efforts. How do you protect against losses should there be a temporary shutdown of your business?

It is not just a matter of being safe instead of sorry.

It is acknowledging that your business is too important to leave any risk wide open. A temporary shutdown does not have to be permanent or debilitating with the right insurance behind you.

The Insurance Journal recently published a case brought by the owner of several restaurants against its insurer over business interruption due to the coronavirus shutdown ordered by the mayor.

The court, in dismissing the business interruption claim, held that the restaurants’ insurance policy is not triggered, because the shutdown did not amount to direct physical loss.

‘Business interruption insurance (BI), also called consequential loss and loss of profits insurance, provides cover for the financial losses due to an interruption to a business caused by material damage to property’.

BI AND THE CURRENT PANDEMIC

While it is true that a typical business interruption policy would not cover the COVID-19 pandemic, coverage for communicable/infectious diseases (which would include COVID-19) could be added as an optional coverage to the policy.

The dilemma with COVID-19 claims is that most businesses did not consider, or were even aware that they were not covered for a pandemic risk. The devastating economic impact on businesses caused by this pandemic has awakened CEOs to this exposure, resulting in a huge spike in demand for the inclusion of non-physical business interruption options to their standard BI policies.

Non-physical business interruption policies can be tailored by insurance experts who will assess your current exposures and then devise solutions to help protect you against these threats.

Companies need to consider how to keep their businesses afloat following temporary closure. For example, a hotel which is destroyed or damaged by fire will suffer physical damage, but in addition, the company will most likely also suffer a loss of business income from which to pay the expenses of the business and make a profit – this is where business interruption insurance comes in.

Every CEO, during this COVID-19 crisis, should give serious thought to calling in their broker to review their BI policies. While it may be too late for some, it is a lesson for all for the future.

Email feedback to mib@cwjamaica.com