Is COVID-19 an Insurable Event?

Now is the time to review your policies and make claims, especially if your business is a restaurant.

Nearly every business has some form of insurance and now is the time to review it. As COVID-19 continues to interrupt normal operations, insurance may cover business losses. If you are a business owner, it is important to review your policy and, if there is a plausible claim for coverage, make a claim now.

Business Interruption Insurance

Business interruption insurance is often an add-on to a general commercial property policy. In theory, it protects businesses against loss of business income resulting from events that caused their business to stop operating for a time. It is never that simple, though, and interpreting these policies will be more complicated with COVID-19. The best thing a business can do is review for coverage, prepare its paperwork, and make a claim.

Business interruption insurance policies are most frequently triggered by a “covered cause,” such as a fire or flood that caused direct physical loss to business property, which in turn prevented a business from operating in its normal course. The challenge in making an interruption claim based on COVID-19 is the physical loss requirement. During the pandemic, most businesses were closed to prevent the spread of the virus, not because of property loss or damage.

Businesses may have an easier time making a claim for business interruption for losses related to “civil authority” events. These policies provide coverage for business losses when a civil or military order interrupts business. While physical loss or damage is also required to trigger coverage under these policies, arguably a mandatory quarantine to prevent the spread of COVID-19 may qualify as an insurable event. The key question is whether the corona virus contamination is tantamount to physical loss or damage.

The Billy Goat Tavern Case

That is exactly the question Billy Goat Tavern is asking in its recently-filed class action lawsuit against Society Insurance. See Billy Goat Tavern I, Inc. et al. v. Society Insurance, 1:20-CV-02068 (U.S. District Court for the Northern District of Illinois). Billy Goat is a well-known restaurant chain that operates at Chicago’s Navy Pier and Millennium Park among other Chicago locations. In its lawsuit filed on March 31, 2020, Billy Goat on behalf of itself and all similarly situated insureds, challenges Society’s denial of claims for lost business income following government-mandated closures of restaurants in Illinois. Billy Goat asks a court to find the mandatory closures resulting from COVID-19 rendered Billy Goat’s business property unsafe and inaccessible for dine-in customers, which should be considered “direct physical loss” under its general business policy. Billy Goat seeks compensatory and punitive damages for the insurance company’s claim denial.