CHICAGO — With the COVID-19 pandemic having kept many Americans isolated in their homes for weeks, Laundromat owners are no doubt feeling the economic pressures of limited (or even no) business. They could turn to their insurers for financial relief only to find out their coverage may not extend to disease outbreaks.
Ann Hawkins, vice president of NIE Insurance, says a commercial insurance policy does not cover COVID-19.
“Most, if not all, insurance companies have an endorsement on their policies called ‘Exclusion of Loss Due to Virus and Bacteria,’” she says.
Most traditional property policies exclude loss or damage resulting from a virus, disease, pathogen, or contamination, says Adam Weber, president of Irving Weber Associates.
“Policies will generally include a definition of what is to be contemplated within the scope of the exclusion,” he says. “While it is far from standard in the property insurance marketplace, following similar virus outbreaks from the recent past (SARS, MERS, Ebola, etc.), a few insurance carriers have introduced an additional coverage for communicable disease.”
“It is unlikely that any standard or even expanded Laundromat insurance policy would have a named risk of a pandemic, including a viral pandemic,” says California Laundromat broker Larry Larsen. “It is also unlikely that the voluntary closure of the Laundromat would be considered a covered risk in a loss of business claim.”
“In order to trigger business interruption coverage, there must be direct physical damage to your premises (like a fire),” says Larry Trapani, president of Brooks-Waterburn Corp. “Closing for the virus is not considered ‘direct physical damage’ and therefore no coverage is provided.”
Same goes for a “Civil Authority” claim in which a business cannot operate because a government entity closes an area, he adds.
Hawkins agrees: “This would only apply if there was direct physical loss or damage, caused by a covered cause of loss, that triggered the Civil Authority action. COVID-19 is not a covered cause of loss.”
If the COVID-19 outbreak has impacted your business, Weber says it’s important to proactively engage with your insurance broker and insurance carrier to discuss anticipated loss exposures and potentially relevant coverages.
“In the event there is a potential recoverable claim, it’s important to maintain detailed records and invoices of cleanup and response expenditures,” he says. “Businesses should also closely monitor business interruption impacts and extra expenses that may be incurred.”
Comments in this article are for informational purposes only and should not be relied upon as legal advice. Contact your insurance broker and carrier with questions about your specific situation.