Q: Without a direct physical loss, would the shutdown of a restaurant or business due to coronavirus concerns trigger contingent business interruption coverage?

Response 1: Under current standard ISO commercial property forms, the general answer to your question is no. Contingent business interruption would not cover the shutdown of a business due to coronavirus concerns because there has been no direct physical covered loss.

You might be interested in this article describing two forms ISO has created to deal with shutdowns required by a civil authority due to coronavirus concerns. These forms have not yet been filed and have not been assigned form numbers. ISO has also not provided loss costs.

Response 2: Not all contingent business interruption coverage is the same. That said, interruption of a supply chain or a government shutdown might well trigger an insured loss. It would be more difficult to find coverage if a restaurant owner simply decides to close due to concerns without such an event. Check with your underwriters.  

Response 3: The business income form states there must be physical damage to property from a covered cause of loss. If people do not go out to eat because of fear of the virus, that is not a covered cause of loss. The same is true if people are restricted to their homes because of an outbreak of the virus in their community.

Response 4: Business interruption insurance requires direct loss or damage to property, it’s the same for contingent or civil authority coverage. Here’s more information from Saxe Dornberger and Vita, P.C.

Response 5: No coverage applies. There must be an accident under the covered perils as defined per the form. I would also suggest that you read the section of the insuring agreement for government exclusions.

Response 6: It depends on the coverage and facts. If you shut down because of "concern"— meaning that the shutdown is because someone is worried—probably not. 

Response 7: The answer is no for two reasons. There is no property damage, which is required before business income responds. And, there is a specific exclusion related to viruses. 

Response 8: If you're talking about an ISO business interruption form built on the usual cause of loss forms, the answer is easy: no. I've seen forms that deal with local contamination and food poisoning, but I doubt they'd cover this situation. If anybody was writing a coverage like that a few months ago, something tells me that the price of poker just went up. The potential exposure is huge and the damage to any one business would be difficult to define. 

I've been listening to Boston Public Radio, and they're reporting that business in Chinatown has dried up. That's not a result of active cases of the virus but rather fear of the virus, racism or both. The results of fear are catastrophic and almost certainly not covered by insurance.

This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

To learn more about coronavirus as business interruption insurance, watch a free 25-minute "Coronavirus (COVID-19): Does Business Income Respond?" webinar on demand or register for a date that fits best with your schedule.

To help Big “I” members prepare and respond to the coronavirus epidemic, the association created a resource page, which will be updated as the outbreak develops.