COVID-19 had a huge impact on how Business Interruption (BI) Insurance was viewed and challenged — and honestly, it exposed some major gaps in standard coverage. Here’s a breakdown of how COVID-19 affected BI claims, and what it means for businesses going forward:
😷 How COVID-19 Affected Business Interruption Claims
❌ 1. Mass Denial of Claims
Most BI policies require physical loss or damage to property to trigger coverage.
- Since COVID-19 was a non-physical, viral event, insurers widely denied claims.
- Lockdowns, government shutdowns, and capacity limits did not qualify under typical BI terms.
Example: A restaurant forced to close due to lockdowns tried to claim lost income, but was denied because there was no structural damage.
⚖️ 2. Surge in Lawsuits
Thousands of businesses sued insurers over denied COVID BI claims.
- Legal arguments focused on whether the presence of the virus constituted “property damage.”
- Courts in many jurisdictions sided with insurers, though a few early cases went the other way.
- In the U.S., the majority of federal and state courts ruled against policyholders.
🧾 3. Exclusions for Viruses
Many BI policies already had virus exclusions (especially post-SARS in the early 2000s).
- Wording like “loss caused by virus, bacteria, or pandemic” was standard in most policies.
- Even where exclusions were not explicit, insurers still argued COVID was not a covered peril.
💼 4. Lack of Pandemic-Specific Coverage
Very few businesses had pandemic-specific endorsements — these were rare and expensive before 2020.
- Some large corporations had specialty pandemic coverage and were able to claim successfully.
- Small businesses largely had no protection.
🔄 5. Industry Shifts Since COVID
COVID has changed how insurers and business owners view BI coverage:
For Insurers:
- Tightened wording in new policies to explicitly exclude viruses and communicable diseases.
- Greater focus on cyber BI and supply chain disruption insurance.
For Businesses:
- Increased interest in contingent BI, extra expense, and special risk coverage.
- More businesses are asking: “What exactly is covered, and what’s not?”
🔍 Lessons Learned for Business Owners
- BI Insurance does NOT cover everything — especially not pandemics.
- Review your policy carefully — look for exclusions and coverage triggers.
- Consider:
- Extra expense coverage
- Contingent BI (for supply chain issues)
- Pandemic risk solutions (if they become more available)
Would you like a sample COVID-related BI claim denial letter breakdown, or help drafting questions to ask your insurer about coverage in future pandemics or shutdowns?
