With the recent outbreak of the coronavirus (COVID-19) evolving into a worldwide pandemic, virtually every business stands to incur substantial economic losses. One of the options businesses should consider to limit or otherwise mitigate these losses is whether any of the policies in their insurance portfolios for which they paid substantial premiums should be shouldering some of the burden. This post provides a high-level overview of the various types of coverages that potentially may be available to businesses suffering losses caused by COVID-19.
First-Party Property Damage Policies
The most relevant insurance asset for businesses suffering losses from COVID-19 is their first-party property insurance policies. Businesses should be cautioned, however, that their policies likely contain one or both of the following hurdles that could bar or otherwise significantly limit the amount of coverage available:
Requirement of Direct Physical Property Damage: Most, it not all, of the various coverages contained in property insurance policies require that an insured’s loss arise from direct physical damage to property. Insurance companies are likely to take the position that business losses, which overwhelmingly will be of the economic variety (e.g., lost revenue, increased expenses, etc.), have been caused by measures taken by governmental entities and/or individuals to prevent further bodily injury, not by any physical damage to property. Insureds may have grounds to combat this argument, however, depending on their particular business model, the particular language contained in their policies, and the factual circumstances regarding their particular actions taken in response to the pandemic.
Potentially Applicable Exclusions: Many of the business policies likely include certain exclusionary language that potentially could apply to bar some of the losses incurred by businesses as a result of COVID-19, often referred to as “virus” or “communicable disease” exclusions. It is important for insureds to understand that not every insurance policy includes such exclusionary language and, in any event, any such language is required under Wisconsin law to be interpreted narrowly and consistent with an insured’s reasonable expectations of coverage. Businesses should not simply conclude that no coverage is available if a particular policy includes such an exclusion. Rather, it is important to examine the specific language of any such exclusion and to interpret that language within the context and structure of the entire policy.
Keeping in mind the above caveat that all coverages likely require a showing of direct physical damage to property, property insurance policies provide a number of coverages that may be triggered by this event:
Physical Property Damage: As mentioned above, this coverage reimburses insureds for costs incurred to restore insured property that has suffered direct, physical damage. This is not likely to constitute much, if any, of the overall losses suffered by businesses as a result of COVID-19.
Business Interruption Loss: This coverage is designed to reimburse an insured business for any income the business would have earned had the property damage event not occurred. This coverage should be particularly important for the COVID-19 pandemic, which is adversely impacting the worldwide economy.
Contingent/Dependent Business Interruption Loss: This coverage reimburses an insured business for losses incurred when another entity upon which the business depends on to conduct business (such as a supplier) suffers a property damage event that prevents that entity from performing its obligations to the insured. This coverage similarly could be vital to mitigating the losses caused by COVID-19 given its widespread economic impact.
Civil Authority: This coverage is triggered when the action of a governmental body prohibits access to a business insured’s premises due to a covered property damage event to property not owned/controlled by the insured. This coverage could become relevant as both the federal and state government take more aggressive measures to prevent further spread of COVID-19.
Expenses to Reduce Loss (Mitigation Expenses): Virtually every property insurance policy also agrees to reimburse insureds for the reasonable expenses incurred to prevent further covered losses under the policy. Businesses should be sure to keep detailed records of any preventative measures taken in order to prevent the spread of the virus to its employees and customers (e.g., purchasing extra cleaning supplies or services).
Additional Insurance Assets
Businesses additionally should review and keep on their radar the following policies that could be relevant to their particular circumstances:
Third-Party Liability Policies: Businesses should keep in mind their insurance policies that protect them from liability claims, such as their general liability and workers compensation policies. It is possible that businesses may face claims from third parties that allege that the third parties contracted the virus while on the business’ premises or as a result of some alleged negligent conduct by the business. These claims should trigger coverage for “bodily injury” claims under those policies. Insureds should also keep in mind that they may be able to seek reasonable mitigation costs under these policies for activities undertaken to reduce or minimize their liability exposure to such claims.
Event Cancellation Policies: For businesses that host or conduct events that involve the gathering of large groups of people, they may have procured a specialized insurance policy to provide coverage specific to such events. While these policies tend to be more customized to the particular business’ activities and risk profile, the overall purpose of these policies is to protect businesses when such events must be cancelled due to circumstances such as the COVID-19 pandemic. If a business finds itself in such circumstances, it certainly should be providing prompt notice of a claim to its insurer under such a policy.
We currently are facing an unprecedented worldwide pandemic that is likely to impose financial hardships on virtually every aspect of our economy. It therefore is important for businesses to take every measure possible to mitigate or otherwise limit its losses, including steps to maximize recovery under its insurance assets. Businesses should carefully review their various insurance products and should be mindful to comply with the notice requirements under each and every policy under which coverage may potentially be triggered by the COVID-19 outbreak.
It is also important to note that the landscape is ever-changing. For example, at least one Wisconsin legislator has commented publicly about potential government intervention to assist businesses specifically with coverage for business interruption losses caused by this pandemic. Businesses should not hesitate to seek any needed coverage advice from experts in the industry.
The Business Law team at Stafford Rosenbaum is monitoring the COVID-19 situation closely. We will continue to provide legal updates related to COVID-19 as our firm is well-positioned to advise or assist you in seeking to recover any losses related to the COVID-19 pandemic. If you have any questions or require assistance, contact us at email@example.com or 1.608.256.0226.
 For example, it has been held in Wisconsin that physical property damage “includes contamination to natural resources such as groundwater and soil and the cost of subsequent cleanup.” Maryland Cas. Co. v. Wausau Chem. Corp., 809 F. Supp. 680, 693 (W.D. Wis. 1992). Depending on a business’s particular circumstances surrounding the COVID-19 outbreak, it may be reasonable to conclude that similar above-ground contamination of a business’s physical space (including the spread of infectious virus particles within insured premises) occurred. See, e.g., Sentinel Mgmt. Co. v. New Hampshire Ins. Co., 563 N.W.2d 296, 300 (Minn. Ct. App. 1997) (“Sentinel presented evidence showing that released asbestos fibers have contaminated the buildings, creating a hazard to human health. Although asbestos contamination does not result in tangible injury to the physical structure of a building, a building’s function may be seriously impaired or destroyed and the property rendered useless by the presence of contaminants.”).