Does COVID-19 Contamination Count as Property Damage?

New Yorkers have just lived through one of the most challenging times in the city’s history. We do not yet know whether the worst is over or if there will be a second wave. Many New York City business owners believed they were adequately insured for virtually anything that came their way until the pandemic shut them down.

Almost as soon as the shutdown occurred, but before policyholders began filing claims, insurance companies announced they would not cover coronavirus damage. Whether Covid-19 contamination counts as property damage– as required by business interruption insurance policies– is still an open question.

Courts have not yet ruled on this issue, and litigation is expected. One of the few options business owners have if their insurance company refuses to pay for the damage is joining with thousands of others in the same situation and suing the insurance carriers.

A New York City Business Interruption Insurance Attorney at Douglas and London will fight hard to hold those insurance carriers who refuse to cover Covid-19 contamination accountable. While various states have proposed their own versions of bills requiring insurance carriers to cover coronavirus-related losses, it is uncertain whether these bills will pass. If they do, there is no question the insurance companies will launch a court challenge.

Business Interruption Insurance

Business interruption insurance is designed to compensate for lost revenue when a business must cease operation due to circumstances beyond their control. Generally, this refers to fires, earthquakes, and floods. The policy covers the repairs to the building, but the business interruption insurance pays for lost revenue, employee wages, relocation costs, rent and lease payments, loan payments, and taxes.

Property Damage or Physical Loss

Business interruption insurance policies require property damage or physical loss to pay a policyholder’s claim. Various court decisions in the past have recognized microscopic contaminants, such as E. coli bacteria, as constituting property damage for business interruption insurance purposes. The bottom line is whether the contaminant has rendered the property unsafe.

Insurers are arguing that the coronavirus did not cause a direct physical loss to the property, and thus coverage does not extend to them. There is also the question of proving that coronavirus was present on the property. If employees or those associated with the business were diagnosed with Covid-19 or tested positive, there is proof that the virus was present. If there were no positive coronavirus cases linked to the company, this argument is harder to prove.

Civil Authority

Because city and state governments ordered the closure of businesses due to the pandemic, civil authority coverage should apply. It is designed to cover losses when the government or military limits access to a site because of damage in the vicinity. The government’s restrictions on people gathering in a workplace render these business properties unusable. The word “restrict” is critical, as civil authority coverage in business interruption insurance applies only when access to the property is prohibited.

The Virus Exclusion

Many of these policies officially exclude viruses as a cause of loss. This language was inserted after the SARS epidemic earlier this century. Insurers do not offer policyholders the ability to purchase virus coverage.

However, if the policy’s wording is less specific, referring to disease, pathogen, or microorganism, the virus exclusion will face court challenges. In addition, some language in policies refers to bacteria or microbes, which are living organisms. However, a virus is not.

Contact a New York Business Interruption Insurance Attorney

If your insurance carrier denies that Covid-19 contamination counts as property damage, we can help you during this crisis. Call or text us 24/7 or fill out on our online contact form to schedule a free consultation. Our clientele is not limited to New York. We will fight for those affected by business interruption insurance denials nationwide. Our dedicated attorneys have recovered more than $18 billion in settlements and verdicts for clients. We work on a contingency basis, so there is no fee unless you receive compensation. Hablamos Español.