Business Interruption Insurance Often Doesn’t Cover COVID-19

Mar. 24--When Bryan Bush heard his five video poker truck stops were being shut down as part of an effort by the state to control the spread of the coronavirus, he reached out to his insurance agent to see about making a claim on his business interruption insurance policy.

"My income just stopped," said Bush, who owns truck stops in Port Allen, Donaldsonville, St. Martinville, Breaux Bridge and Spanish Lake. "My convenience stores are still open and I'm selling fuel, but to lose the money on the video poker side of the business is huge."

The truck stop side of the business is actually a money loser for Bush, he said, because of all the requirements he has to meet to be a licensed video poker casino, in terms of size, security and amenities. He's losing $30,000 to $40,000 a month on each of his truck stops.

But Bush's agent said the losses he's sustaining during the closure aren't covered by his business interruption policy because those plans don't cover damage caused by a virus or disease outbreak. Generally, policies require that in order for a claim to be paid, physical damage must be done to a business.

Insurance Commissioner Jim Donelon said every policy he's ever seen excludes business losses caused by a virus. And just about every policy requires that a business sustains physical damage as part of a natural disaster.

"They all contain generally the same language, but there's always the oddball policy," he said.

Bill Davis, a regional spokesman for the Insurance Information Institute, a group that represents the industry, said he has never seen or heard of policies that allow for business interruption claims to be paid as the result of a virus outbreak.

"This is a hard thing for underwriters to price coverage," he said. "We're plowing new ground here."

Some businesses are trying different arguments in an attempt to get their claims. There's been talk that the coronavirus is damaging property by its presence. Bush notes that his truck stops were forced to close by the order of Gov. John Bel Edwards. "The virus didn't shut me down, government shut me down," he said. "None of my people had the virus."

Donelon notes that generally when government shuts down businesses because of a natural disaster such as a hurricane or flood, the requirement for a business interruption claim is physical damage to the premises or premises in the vicinity. He said some courts may interpret the potential existence of the coronavirus as constituting physical damage.

The model for companies that need business interruption claims to help offset losses caused by the coronavirus is 9/11, Donelon said. Prior to the devastating terrorist attacks, insurance companies excluded acts of war from their policies.

When the attacks happened, the insurance industry said it would not assert the act of war exclusion and keep them from paying out claims in that circumstance. And Congress passed a bill that made the federal government the backstop behind private insurance companies if another massive attack happened. That policy is re-authorized by Congress every few years, Donelon said.

"Things the size of 9/11 or COVID-19, the federal government is the only one with pockets deep enough to handle," he said.

Davis said the insurance industry's focus is on getting through the coronavirus pandemic. "The only comparison is the 1918 Spanish Flu and the world is a whole lot different," he said.

If Congress passes a change that allows for business interruption insurance coverage to take care of disease outbreaks, the insurance industry will have to formulate a way to price the new policies. "We've never had to do this," Davis said. "This is vexing for all of us."

Dr. Chad LaCour, a Baton Rouge dentist, said he's had business interruption insurance for 24 years, since he's been in business. He filed a claim once as a result of a hurricane several years ago and the payment was handled promptly.

As a result of having his coronavirus claim denied, LaCour said he's going to have to consolidate his practices and let another dentist and some of his 14 employees go. He's also seeking a Small Business Administration loan to cover some of his losses.

"It's pretty sad that the insurance companies are not stepping up when we really need them," he said.

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