We understand that our business clients are being negatively impacted by the COVID-19 pandemic, and have questions regarding coverage. In anticipation of those questions, and based on the information currently available, we are reaching out to provide some timely information.
At this time, the main concern is around a Government-mandated temporary shut-down of business. This naturally focuses attention on Business Interruption insurance and what, if any, coverage is available under these circumstances. We have reviewed the policy wordings offered by major insurers operating in Canada to determine how they might respond to the COVID-19 pandemic. First, it is important to understand what circumstances must be present in order for a Business Interruption claim to be successful. While each wording is unique most share some common provisions, such as:
- There must be “direct physical loss” or “property damage”
- The damage must be to “covered property”
- The damage must be caused by an “insured peril”
This is what we refer to as the “trigger” for claims under a first-party property insurance policy. This is not the case with the COVID-19 virus as there has not been any “direct physical loss” to the insured property. Canadian courts have not directly addressed whether the presence of a virus causing a business’ closure constitutes “direct physical loss,” however, the current crisis may cause insurers and courts to revisit this question in the future. For this reason, we are recommending that clients whose business premises have been forced to close due to direct contamination by the virus report the interruption to their insurance carrier.
To assist businesses, the various levels of government have announced various monetary measures aimed at those impacted by COVID-19. You may have already read about changes to the Employment Insurance program, as one example. At this time we are encouraging our clients to maintain records of all lost income and/or increased expenses, so that any available government assistance may be accessed at the appropriate time. Please visit the official Government of Canada website for additional information: https://www.canada.ca/en/department-finance/economic-response-plan.html
We don’t yet know how long this crisis may last, but please be advised that if you are closing your business for 30 days or more you must notify your insurance carrier. Whether you are a tenant or building owner, please be sure to visit/inspect your insured premises on a regular basis to ensure all protective systems are fully functioning (i.e. heating, electrical, water, security, sprinklers, fire suppression systems, etc).
Please be advised that insurance carriers are also heeding the call to provide whatever temporary relief they are able to during this crisis. While each insurer may have a different approach we are noting some common themes:
Premium Payments: carriers are taking steps to assist clients by rearranging or deferring some payments. Insurance companies are willing to waive NSF fees for missed payments and to re-schedule payments to a later date.
Expiry or Termination of coverage: generally speaking insurers will by necessity extend some limited flexibility to their policyholders who may have coverage expiring during this time.
Commercial General Liability Premium calculations: for businesses who have seen substantial reductions in revenue, some carriers have expressed the willingness to recalculate liability premiums mid-term, based on revised projections.
While our own operations have been impacted, we have taken all necessary steps to ensure continuity of service. Our staff are now working remotely to help slow the spread of the virus and to keep our employees and their families safe. We are in regular communication with the insurance markets and remain available via telephone, email and even old fashioned fax. Until further notice, we ask that you please do not visit any of our offices in person, as they have been shut to the general public.
Please stay safe and do not hesitate to contact our office with any further questions or concerns
The Palladium Insurance Group Commercial Team