The impact of COVID-19 and your commercial insurance
With the coronavirus, and the repercussions it entails on so many levels, several questions arise concerning commercial insurance policies, especially regarding business interruption and the triggering of the coverage.
Here are some quick answers according to the IBC
Generally speaking, traditional commercial or business interruption insurance policies do not cover losses due to a pandemic like that of COVID-19. That being said, some organizations will have purchased supplier deficiency insurance, individual coverage for business interruption and supply chain interruption protection where guarantees could be triggered as soon as the health organization will have declared a pandemic
What is commercial insurance?
Insurance to protect a company’s assets from loss / damage from a variety of causes.
How does commercial insurance work?
- The Broad form only covers loss / damage resulting from the risks listed in your policy. Any exclusion and anything not mentioned therein is not covered.
- The Extended Formula covers all risks except for the specified exclusions
What is business interruption insurance?
Coverage including a list of endorsements added to the commercial policy. In the event of temporary closure (quarantine), it will cover lost profits and compensate for current expenses.
How does business interruption insurance work?
- The Gross Profits Formula pays indemnities covering the replacement or repair of goods / damage or the replacement of stocks.
- The Profit Formula pays compensation allowing the company to return to its normal level before the interruption, up to the limits set by the police.
- The Additional Fee Formula targets loss / damage to businesses that may continue to operate during the affected period.
Most commercial insurance policies include compensation by the insurer for actual loss of “business income” due to “necessary suspension” of activities during the “recovery period”.
Commercial or business interruption insurance being complex and specialized, many variants will be specific to your company. In short, for any specific question or clarification, you should refer to your insurance broker.