Coronavirus Insurance Coverage Explained

Coronavirus and Canadian Insurance Coverage Explained

Coronavirus / COVID-19. Canadians are concerned. Our clients across the country are rightfully emailing and calling their ALIGNED Insurance Advocates with questions and concerns. You may be one of them.

Business owners have questions about COVID-19 and their commercial insurance policies. Specifically, people want to know about Coronavirus and what, if anything, is covered by their business insurance in Canada. Our brokers are working hard to provide answers about Coronavirus and business insurance coverage.

What you need to know about Coronavirus and your business insurance

The unfortunate reality is that basically no business insurance policies cover financial losses that businesses incur associated with, or directly resulting from, Coronavirus or any other virus or disease.

For further clarity, we wanted to highlight two coverages that are commonly asked about which definitely warrant further review and explanation:

  1. Interruption by Civil Authority
  2. Business Interruption

What is Interruption by Civil Authority insurance coverage?

There is a section in a typical property insurance policy that responds to Interruption by Civil Authority. It is commonly defined as:

the actual loss as insured hereunder during the period of time, not exceeding two weeks, while access to the “premises” described in the Declaration Page(s) is prohibited by order of civil authority, but only when such order is given as a direct result of direct physical loss or direct physical damage to neighbouring premises by a peril insured against under this policy.”

What is Business Interruption insurance coverage?

Business interruption coverage is part of a commercial property policy. However, business interruption coverage is only triggered if the loss in revenue is caused by an insured peril like a fire, flood, sewer back-up, etc. 

Business Interruption and Interruption by Civil Authority coverages are both triggered by physical damage caused to physical assets. These coverages were not built or intended to cover financial losses from viruses, pandemic and/or diseases. 

As a result, there is no coverage for loss of revenue due to COVID-19 under any property insurance policy in Canada to the best of our knowledge.

Not to confuse things as the above applies to more than 99% of the companies purchasing business insurance, but for the sake of completeness, some very specific and standalone event cancellation insurance policies purchased prior to the pandemic might respond in some cases including:

  • If international borders are closed and physical goods can’t be shipped and/or received there might be some contingent business interruption coverage.
  • If COVID-19 is explicitly and physical found on your business premises or it has been determined one of your employees is a confirmed case and might have been contagious while on the business premises.
  • Specialized viral coverage had been purchased as part of specialty business insurance products typically designed specifically for the health, medical and/or education sector.

In the days and weeks to come, we will provide new content about business insurance products and services that are particularly relevant during this evolving situation.

Will insurance companies in Canada offer coverage related to Coronavirus financial losses?

Separately, we are paying close attention to see if any insurer will offer any sort of new product that could help protect companies from Coronavirus related financial losses.

To date there have been none and we don’t expect any in the near future (informally the industry views it similar to insuring a house while it’s already on fire).

Related Matters: Understanding business interruption

Providing useful and practical commercial coverage information is one of the most important things we do as insurance brokers. Here’s an extract from one of our more than 1,000 informative blog posts.

It features information about business interruption insurance in Canada.

When a worst-case scenario happens, your business expenses may include some or all of the following:

  • Property taxes
  • Ongoing utility costs even if it’s just for hook up
  • Payroll
  • Vehicle, equipment and/or other loans or lines of credit
  • Advertising expenses
  • IT expenses
  • Ironically…insurance costs
  • Employee benefits
  • Telephone & cell phone
  • Internet
  • Ongoing maintenance

It’s inevitable that more often than not, risk happens when you least expect it. This is why it’s vitally important for you to fully understand what your insurance will cover when a worst-case scenario situation happens.

Keep reading “Business Interruption – Insurance broker Toronto”

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