Coronavirus and Potential Insurance Coverage

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By Victoria Ostrosky

Iz Victoria.headshotWe’ve coined a new phrase for 2020 – “social distancing.” And a word that, until now, had been reserved for online gaming and the Plague. “Pandemic.” With the Coronavirus, or COVID-19, it seems our worst fears as a society have been realized. However, while we watch the news and self-quarantine to help “flatten the curve” (another new phrase), we want to know exactly how we’re really doing and how painful this is going to be.

At the time of this writing, Florida Gov. DeSantis has suspended vacation rentals for two weeks; local authorities have closed many beaches and restaurants are only able to offer take-out or delivery. No dining in and groups must be 10 people or less. Given this situation, any vacationers have either already left, or are soon leaving.

If you own a rental property, what does this mean to your loss of rental income? If you own a business, what does this mean to business income coverage? Is this a covered claim?
Can you get reimbursed from your insurance policy? Depending on the claims stated, coverage may exist under general liability, D&O and E&O. It also may be possible that Workers Compensation coverage would apply if any employee contracted the virus on the job.

That being said, however, the long and the short of it is – it’s probably not covered. According to David Thompson, FAIA’s (Florida Association of Insurance Agents) insurance nerd, “While the likelihood of finding coverage under a standard ISO business income policy for losses due to COVID-19 is not zero, it is very unlikely according to most insurance exerts I know and interact with.”

Each carrier, along with its specific policy language, can vary. So, it’s always best to read your policy carefully. On most ISO policy forms, there are specific “triggers” in the policy language stipulating there must be direct physical damage to the property at the location covered under the policy.

What are some examples of triggers? A fire breaks out in the kitchen, causing your home, condo or business to be unusable for weeks or months. A leaking water heater damages your walls and floors, a hurricane blows your roof off. These are examples of direct physical damage that would be considered a covered peril.

According to Insurance Journal, in an article written by Christopher J. Boggs, there are two specific exclusions to note in the standard ISO policy forms:

“Discharge, dispersal, seepage, migration, release or escape of ‘pollutants’ unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the ‘specified causes of loss.’

“’[P]ollutant’ is defined in the form to mean: ‘any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.’ A contaminate, particularly a biological ‘contaminant,’ is defined as a contamination of food or environment with microorganisms such as bacteria, VIRUSES, fungi or parasites.”

So, based on these exclusions, and the standard 72-hour waiting period, since the “contaminant” can be killed by being disinfected, and the virus can only live on surfaces for a short period of time, there would be no qualifying loss; therefore no coverage.

What about ‘civil authority’, you might ask. You must go back, again, to direct physical loss – there must be a physical loss from a covered peril that then causes the civil authority to prohibit use of the location because of a dangerous physical condition. Some of the same ideas apply from above – the virus can be destroyed via disinfecting and it has a short life on surfaces.

We’re still working our way through some murky waters. Our everyday lives have been severely disrupted due to new guidelines and decisions made at the local, state, and federal levels, as an attempt to retard the spread of COVID-19 and protect Americans. Keep a close eye on upcoming bills as they move through Congress.

Everyone is hurting right now, and insurance carriers are in uncharted territory.
The upshot of it all is this – if you, as an insured, want to file a claim, we, as your agents, will be happy to assist and leave the decision making up to the carrier.
Everyone stay healthy out there!

Insurance Zone, owned by Joe and Lea Capers, is a full service commercial and personal lines insurance agency serving Destin, Miramar Beach, Santa Rosa Beach (30A) and Inlet Beach. Visit their Video Library on www.ins-zone.com and watch several informative videos on ‘Homeowners, Condo and Business Owners’ or call 850.424.6979. Victoria Ostrosky, author of this article, is an Agent/CSR with IZ.

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