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Businesses are just now starting to feel the effects of the coronavirus, COVID-19. Surely, these effects locally and on the economy at large will be felt for years to come. Churches and non-profits are having services and events cancelled or moved to livestream, and there is a slow-down of all other in-person gatherings. How this will impact the administrative and financial health, it’s way too early to tell. Will tithes and donations drop off because the building isn’t open for services? Will members curtail their giving because they’re spending in other areas or perhaps their financial livelihood has been affected? If donations are significantly reduced as an effect of the coronavirus, is there insurance coverage for that? If staff, members or guests contract the virus at our facilities is our organization liable?
Loss of Revenue
Loss of revenue or “Business Income (BI)” is a coverage that typically falls under the Commercial Property Insurance policy. However, for a claim to be paid, we must carefully consult the policy language. All property policies vary in coverage, limits, triggers and exclusions, so organizations should review their specific policy before filing a claim or expecting a BI loss to be paid. That being said, the majority of all commercial property policies have both specific exclusions and coverage limitations on BI claims from viruses and “civil authority” actions.
Under most policies, an exclusion of loss due to virus or bacteria is included on the policy. The most common exclusion, which many insurance carriers apply, comes from the widely used Insurance Services Office (ISO) form CP 01 40, and it specifically states:
“there is no coverage under such insurance for loss or damage caused by or resulting from virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. The exclusion in this endorsement applies to all coverages provided by your Commercial Property insurance, including (if any) property damage and business income coverages.”
You may be thinking, however, the virus doesn’t cause any damage, it’s the state or federal government recommending, or in some cases requiring, a quarantine that’s affecting the income stream. That too is contemplated in the insurance policy. While many property forms can vary, we’ll look at the “Civil Authority” coverage in the industry standard ISO form, CP 00 30. This forms states:
“We will pay for the actual loss of business income you sustain and necessary extra expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any covered cause of loss.”
Most BI coverage in the commercial property cause of loss form will include “Civil Authority” as a covered cause of loss, but while it is providing coverage, it is simultaneously limiting the coverage to a specific type of event. As we can see, the coverage requires a “direct physical loss or damage to property” and requires a “covered cause of loss.” For example, after Hurricane Irma, many roads were impassable and the local authorities restricted traffic. When businesses lost income because the authorities restricted traffic and affectively quarantined an area, there was insurance coverage. The coverage was triggered by a physical, wind damage loss to trees or power lines, even though it’s wasn’t on our property. In the case of coronavirus, the loss of income isn’t due to physical damage and isn’t due to a covered loss (because viruses are excluded).
Workers’ Compensation claims for COVID-19
It is possible that some organizations will have employees incur medical expenses or lost wages due to a COVID-19 illness. Any claim for workers compensation due to the illness would be investigated and evaluated based on the circumstances of each claim, but keep in mind that the workers’ compensation system is not the appropriate starting point for COVID-19 concerns, testing and treatment. Claims involving communicable disease are typically not considered compensable for employees who are at no greater risk than the general public.
If the coronavirus, COVID-19 causes a loss of income on the Commercial Property Policy or a claim on the Workers Compensation policy, it is highly unlikely either would be covered.
To view our complete risk management library of articles for churches and non-profits, click here.
John Keller, CRM ARM CIC AAI is Client Advisor & Risk Manager at Gulfshore Insurance specializing in non-profit and religious organizations. John works with a wide range of business clients to deliver strategic risk analysis and guidance. Comments and questions are welcome at email@example.com
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