Coverage under a typical insurance policy for business interruption is initiated by the insured sustaining a loss caused by “direct physical loss or damage to buildings, equipment or stock”. Despite the substantial economic damage that COVID-19 continues to cause, the standard business interruption policy will not assist in lessening the losses sustained by Canadian corporations. In most situations, an insured will not be able to demonstrate that the virus has caused physical loss or damage to buildings, equipment or stock.
Although COVID-19 itself may not directly trigger business interruption coverage, some insurance policies will include an endorsement protecting against interruption by a civil authority. With various provincial governments essentially banning certain businesses from operating, those entities may be able to pursue a claim for coverage under this section of their policy. The indemnity available under civil authority interruption coverage is generally limited to a specified period of time as opposed to the more expansive business interruption claim resulting from direct physical loss or damage.
The calculation of the quantum of any business interruption claim is guided by the policy language. The analysis is usually complex and requires the expertise of forensic accountants.
Insurance policies often require an insured to submit claims within a certain timeframe. Any business adversely impacted by COVID-19 should immediately review its insurance policies to determine at the earliest possible stage whether an insurer should be put on notice in relation to a business interruption or, more likely, a civil authority interruption claim.
Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.