C19 UPDATE: Will Insurance Help Business Owners Recover Lost Income?
Coronavirus Aid, Relief, And Economic Security Act Badges: Pile of CARES Act Buttons With US Flag, 3d illustration

C19 UPDATE: Will Insurance Help Business Owners Recover Lost Income?

The economic disruption from the COVID-19 pandemic has led businesses and policymakers to ask whether insurance should cover associated losses. Most businesses carry Commercial Property insurance, which frequently includes Business Income or Business Interruption coverage. In general, this additional coverage is there to replace lost income due to “covered causes.”

There’s no question that the novel Coronavirus is causing unexpected business losses. But, are the lost profits and other damages covered under these business policies?

Insurers are reluctant to cover business income losses in a pandemic, primarily because of the sheer scale of the loss. Insurance industry sources suggest that the cost of covering business income claims resulting from COVID19 could run as high as $290 billion monthly.

While insurers typically exclude coverage for losses due to viruses or bacteria … the final answer may not be as certain. Depending on the exact policy language, a policy review by an attorney may reveal an argument for coverage.

Some lawmakers also are exploring ways to shift some of the economic burden to business insurers.

For example:

  • Some insurance trade groups are considering an option where businesses submit claims as if the losses were covered, and insurers pay claims from a government-funded pool. There is precedent for this approach in the National Flood Insurance Program.
  • A state bill in New Jersey would require insurers retroactively to include virus transmission as a covered peril in BI policies. The bill also includes a provision that would allow liable insurers to petition the state for partial reimbursement collected from other insurers in New Jersey that do not offer BI coverage. This would potentially shift business losses attributable to COVID-19 to all insurers in the state.
  • Massachusetts, New York, and Ohio have also introduced bills on BI coverage.

If you are a business owner and you carry commercial property insurance, the best advice is to promptly review your policies, notify insurers of claims, document losses, and consult qualified legal counsel.

Resources: The National Law Review, Insurance Coverage in the Time of Coronavirus: Business Interruption Coverage May Require Creativity, March 18, 2020; Congressional Research Service, Business Interruption Insurance and COVID-19, March 31, 2020.

C19 UPDATE: Confused About Coronavirus Relief for Small Businesses and Independent Contractors?

The federal government’s $2 trillion economic relief plan passed last month offers help for small businesses affected by the coronavirus pandemic. Provisions include cash grants, low-interest loans and payments to offset payroll costs for businesses that retain workers or rehire those they have laid off, and enhancements to unemployment insurance and paid leave.

The New York Times has compiled explanations and answers to Frequently Asked Questions about these programs to help relieve some of the confusion and guide business owners, employees, and contractors seeking help.

The article, F.A.Q. on Coronavirus Relief for Small Businesses, Freelancers and More does not require a paid subscription to read.

Some highlights

Who is eligible for relief?

Businesses and nonprofit organizations with fewer than 500 workers. Independent contractors (1099) and freelancers also may be eligible.

What help is being offered?

There are two main federal aid programs, both managed by the Small Business Administration.

The Paycheck Protection Program is a forgivable loan intended to pay for eight weeks of a business’s payroll costs, so the company can retain workers or hire back those it has already laid off.

The Economic Injury Disaster Loan Program also offers low-interest loans to cover most business expenses. A portion of these loans may be forgiven.

Other FAQs:

  • How Much Can I Borrow?
  • What if I Already Laid Off My Workers?
  • How Much Hardship Do I Have to Have to Apply?
  • What Documents Do I Need to Apply?
  • How Does Loan Forgiveness Work?

If your banker is not participating in these programs, the Small Business Administration (SBA) offers a search tool to help you find nearby lenders: https://www.sba.gov/paycheckprotection/find

Resource: The New York Times, FAQ on Coronavirus Relief for Small Businesses, Freelancers and More, April 9, 2020.