Do your losses have business disruption insurance coverage?

Q&A with Bob Luttrell

published in The Oklahoman | March 20, 2020

With many businesses having to shut down or severely limit their operations due to the COVID-19 outbreak, many may be looking to their insurance policies for some relief. In a business Q&A with The Oklahoman, McAfee & Taft business and banking attorney Bob Luttrell explains what business interruption insurance is, why it may (or may not) be triggered by the current pandemic situation, and what companies should be looking for in their policies to determine whether their business losses are covered.

Luttrell said that while it is unlikely that a pandemic would be a covered event since physical damage to a business’ premises is typically required to trigger business interruption insurance, it’s important for businesses to look at their policies very carefully, as coverage depends on the policy. In some cases, government-mandated travel bans, business closures, and restrictions on gatherings could qualify as covered peril.

“You should look for coverage if your business is closed by the actions of a ‘civil authority,’ said Luttrell. “You will want to see if the policy has what is known as ‘contingent business interruption’ coverage. That coverage provides protection against revenue-related losses by covering lost earnings that are the result of a third-party supplier or distributor shutdown whose interruption directly impacts your business. You also will want to see if it has ‘supply chain’ coverage and what parts of the supply chain are covered. Supply chain coverage often will not require physical damage to the supplier or distributor.”

Policies vary, so it’s important that businesses understand what is covered and what is not and, if necessary, seek legal guidance. In some cases, policies may cover items such as lost revenue, rent or lease payments, wages, taxes, and loan payments.