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What does business interruption insurance cover?

Many businesses purchase insurance coverage designed to protect their income and long-term health in case of a catastrophic event, such as a fire or natural disaster. Insurers offer business interruption policies to provide that protection.

However, companies must precisely understand what these policies cover. As the current pandemic has caused dire consequences for numerous companies, it’s estimated that nearly half of all commercial insurance policies contain language excluding losses due to a virus or bacteria.

The SARS exclusionary clause

Thousands of companies were forced to close or scale back operations during the current health care crisis, and many believed their insurance policies included protections to guard against the resulting lost revenue.

However, experts say many insurance companies added exclusions against these widespread outbreaks after the SARS epidemic in 2003. SARS is another strain of coronavirus, and according to the World Health Organization, a total of 8,098 people were diagnosed worldwide with the virus, and 774 died.

What business interruption insurance covers

Many companies who were unaware that their losses during the current pandemic were not covered are taking insurers to court. These decisions have immense repercussions, as in most cases, these policies cover:

  • Lost profits: Policies generally reimburse companies based on average earnings for prior months.
  • Operating expenses: The fixed costs of doing business.
  • Relocation: In case of a fire or natural disaster, coverage reimburses a company’s move to a temporary location.
  • Employee wages: In some cases, employers can recoup payroll costs if they do not want to shut down.
  • Government-mandated closure: Businesses forced to shut down for reasons beyond their control, such as curfews or street closures, can recover lost revenue in many cases.

Many policies cover other items, such as tax and loan payments, commission and training costs and many extra expenses.

Seek knowledgeable legal advice during a crisis

During these uncertain times, it’s crucial to work with an experienced business lawyer who understands your needs, including Oregon’s insurance laws, and most importantly, how they relate to your business and its future success.

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