Time Element Ensurance Coverage to Consider In Light of COVID-19

By Alex L. Brockmeyer, Esq. and Justin M. Thomas, Esq.

The onset of the recently declared pandemic, COVID-19, has injected great turmoil into everyday life and has disrupted business as usual for companies and organizations, without prejudice to size or net worth. The impact on businesses has been and will be devastating for many.

One question raised is whether insurance covers any of the losses associated with COVID-19. The answer, as we are sure all readers will be thrilled to hear is: it depends. Like most questions concerning insurance coverage, the answer depends on the language in your insurance policy.

There are a minimum of three insurance products that might cover losses associated with COVID-19: (1) commercial property policies; (2) builders risk policies; and (3) pollution policies. This article will focus on the first two insurance policies.

Commercial Property Policies

Commercial property policies traditionally cover “business interruption” or “business income” losses. To trigger coverage under a commercial property policy, a business must prove “direct physical loss or damage” to the covered property caused the loss of income or business interruption. At the outset, proving COVID-19 actually existed in the covered property will be difficult. Some local municipalities, like Broward County, have issued shutdown orders that state COVID-19 is physically damaging property. Orders like Broward County’s can assist businesses in satisfying the coverage grant of their commercial property policy.

Another avenue of recover under commercial property policies is the “civil authority” coverage. “Civil Authority” coverage provides coverage for, among other things, loss of business income caused by a government order the limits access to the covered property. “Civil Authority” coverage may be temporally limited. Governor DeSantis’ April 1, 2020, Executive Order Number 20-91 (“Shut Down Order”) should provide businesses a basis to make a “Civil Authority” claim.

However, getting through the coverage grant of the “business interruption,” “business income,” or “Civil Authority” portion of your policy does not end the battle. Most insurance companies will attempt to deny the claim based on either a “pollution” or “virus and bacteria” exclusion. Of these, the “virus and bacteria” exclusion presents the most obvious impediment to coverage because COVID-19 is a virus. Don’t let this deter you from making a claim. Not all commercial property policies have a “virus and bacteria” exclusion.

Even if your policy has a virus and bacteria exclusion, you should still make a claim. Why? There are many reasons. But this article will focus on two insurance products. First, insurance companies must notify their insured of a material change to the coverage afforded by their policy. Failure to provide such notification can result in the striking of that particular exclusion from the policy. Point being, if an insurance company insured you for consecutive years and a prior policy did not have a “virus and bacteria” exclusion, you may be able to get the exclusion struck from the policy.

Second, in getting the “virus and bacteria” exclusion approved, insurance companies may have misrepresented to insurance regulators the purpose of the “virus and bacteria” exclusion. The insurance industry put the “virus and bacteria” exclusion into effect in 2006 after the Severe Acute Respiratory Syndrome (“SARS”) epidemic. Typically, an insurance company must get approval from the Florida Department of Insurance before changing its policy form. The Insurance Services Office, Inc. (“ISO”) circular, which was likely presented to the Florida Department of Insurance to enable insurance companies to add the “virus and bacteria” exclusion to the commercial property policy, indicates the “virus and bacteria” exclusion is needed to clarify a commercial property policy does not cover losses associated with a virus or bacteria. That, however, is simply not true. By 2006, courts repeatedly found coverage under a commercial property policy for losses caused by:

  1. E-Coli bacteria;
  2. Radioactive dust;
  3. Noxious air particles;
  4. Asbestos;
  5. Mold and mildew; and
  6. Pesticides and other vaporized chemicals.

The potential misrepresentation made by insurance companies to the Florida Department of Insurance could enable businesses to prevent insurance companies using the “virus and bacteria” exclusion to deny the claim.

Builders Risk Policies

Similar to commercial property policies, builders risk policies require evidence of physical loss or damage to trigger coverage. This analysis is the same as the analysis for commercial property policies. Moreover, like commercial property policies, builders risk policies usually have some form “Civil Authority,” or “delay in completion” coverage. “Civil Authority” or “delay in completion” coverage may depend on the existence of a physical loss or damage. Coverage under a “Civil Authority” or “delay in completion” provision may be easier to attain in light of the Shut Down Order because the Shut Down Order has impacted some sectors of the construction industry.

Like the foregoing effort to prove coverage under a commercial property policy, satisfying the coverage grant of a builders risk policy is only half the battle. Insureds will still encounter insurance companies seeking to deny claims based on various exclusions. Aside from the “virus and bacteria” or “pollution” exclusions, most builders risk policies contain some sort of “abandonment of work” or “cessation of work” exclusion. At bottom, these exclusions apply if a contractor abandons a project or stops work for a long period. In presenting a claim under a builders risk policy, an insured should emphasize that it is not abandoning the project and intends to resume work as soon as the COVID-19 restrictions lift.

When reporting the claim, make sure to report any increase constructions costs. Additionally, document any other damages. Insureds should be prepared to present documentation to support their claim.


Coverage under a commercial property or builders risk policy is not a given. That said, obtaining coverage is also not impossible. If an insured has a potential claim because of COVID-19, it should notify its insurer. Placing the insurance company on notice of a claim preserves the insured’s rights. Finally, do not let an initial denial discourage you. Insurance companies are receiving a large volume of claims and will issue unjustified denials in hopes of discouraging insureds from continuing forward with the claim. Keep fighting and work with your risk management team.

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