Pandemics excluded from most business insurance

Few businesses were ready for a global pandemic to forcibly shut their doors or cause partial closures, but for many that’s been the reality over the past few weeks.
And if they thought they would be insured through business interruption policies; many were in for an unhappy surprise.
Small Business Development Center at UWF (SBDC) small business consultant Ayesha Haider said most businesses were not insured for a pandemic situation. It comes down to the language in the policy.
“You have to look at that before you sign the paperwork,” Haider said. “Most business owners are looking at hurricanes. They are thinking if that is covered, they are good to go.”
Most insurance professionals say business interruption insurance does not cover business interruption due to a state mandated closure or the potential threat of a disease. In some cases, the lack of physical damage to the property means they are not covered. In others, there is a specific exclusion for “acts of God,” which the pandemic qualifies as. 
Some lawmakers across the U.S. have moved to create legislation that would retroactively make business interruption cover such a loss (Florida is not one of them), but industry leaders warn that is a slippery slope.
Insurers argue that their policies were not meant to cover a global pandemic and because of that, premiums were not calculated to include that risk. Insurance industry professionals argue that retroactively making policies cover a situation they were never intended to cover could make insurance companies insolvent.
“Where coverage for pandemics and other causes of loss were not included in existing policies or reflected in premium payments, requiring insurers to cover those losses retroactively could seriously threaten the stability of the global insurance industry,” the Global Federation of Insurance Associations said in a statement this week.
Insurance policies did exist that were tailored specifically to business interruption due to COVID-19, but they were not utilized in the U.S. because they were such a specific, niche product.
Even if common policies did cover the interruption in business, they typically have a limited window of time covered, usually about two weeks according to analysts. For restaurants and small businesses closed for a month or more, that does not meet the need.
Haider said she is aware of one client who was covered under their policy but only for two weeks, not for the full length of the closure.
Another insurance concern is for employees that fall ill, Haider said. If a business depends heavily on a specific, highly trained or specialized employee or group of employees, having one of those people get sick with COVID-19 could be devastating to a business’s operations. Key person insurance is designed to offer financial compensation if that individual were to get sick.
Haider said many businesses should get one of these policies if they do not have one already.
While small businesses are largely unable to get much needed relief from their insurance companies, other program and grants may provide a better avenue. SBDC offers information on some of these resources as does
Looking to the future, Haider said she hopes she and SBDC’s other business consultants can help small businesses better prepare for the next unexpected disaster through free consulting services.
“Businesses need to plan better to be ready for when a crisis occurs. I know it is difficult because you aren’t thinking about it when things are going well,” she said. “We can help with that.”



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