COVID-19 has taken foothold in Manitoba and across Canada. Authorities continue to urge social distancing as a measure against the exponential spread of the virus. In an effort to flatten the curve here in Manitoba the Public Health Act has been enacted which prohibits public gatherings of more than 10 people, and orders the closure of businesses which are deemed non-essential which includes bars and restaurants (although take out remains available at many restaurants), retail, and many other services. Certainly the COVID-19 virus and the response to it has a significant detrimental impact to our economy and many businesses will see significant decreases in their revenues.
One question which arises for many businesses in these circumstances:
Am I insured for this? The answer is ‘maybe’ and its worth exploring.
Most prudent businesses have commercial property insurance or property and casualty insurance. Business Interruption (“BI”) coverage often forms part of an umbrella commercial insurance policy. It is designed to cover business interruptions or losses in revenue from an insured event. We typically think of events such as fire or flooding which cause direct physical damage to an insured’s property and which trigger BI coverage. Some policies may have contingent business interruption coverage where disruption to supply chains cause a loss of revenue to the insured, but that is not usually a standard term of a commercial policy.
Determining whether an insured would be entitled to benefits in light of the COVID-19 pandemic may not be so straightforward. This requires a careful review of the wording in the policy as well as due consideration of exactly what these circumstances are. Are restaurants and bars closed due to property damage analogous to the conventional thinking about BI claims, or are these closures prophylactic measures to minimize the spread of the pandemic, and if so is that grounds to trigger entitlement under a BI policy? Some BI provisions may specifically exclude the effects of pandemics or diseases. Others might include the requirement of triggering events such as government decrees or orders, such as the Public Health Act, but are losses before the enacted legislation covered? A report from the Globe & Mail suggest that most insurers are taking the preemptive position that COVID-19 closures does not trigger BI coverage. While reports out of Chicago indicate that a group of insured restaurants and bars have filed an application asking the court to confirm BI coverage in the circumstances. It remains a live issue and one that will likely be litigated here in Canada.
The best practice advice for businesses would be to review their commercial property insurance and BI provisions carefully. Insurance contracts often have strict notice provisions so businesses will want to put their insurer on notice as soon as practically possible and in light of any notice periods set out in the policy. Similarly, insurers and brokers will want to be well-versed in their policy language to be able to respond effectively to an increase in inquiries and claims that inevitably are submitted.
Further, as was commented on in an earlier article, Considerations for a Business Owners’ Premises, there may be a flurry of occupiers’ liability claims against businesses that were open and where a plaintiff may argue that the proprietor failed to take reasonable steps which failure caused them to contract the virus. As mentioned previously, causation will always be a challenge for plaintiffs in this scenario, but most commercial and general liability insurance has coverages for these types of claims and most policies explicitly set out the insurer’s duty to defend the insured in the event of such claims. Again, insureds should be mindful of relevant notice periods in reporting any claim or potential claim to their insurers.
Please do not hesitate to contact your relationship partner or lawyer if you have any questions or if we can be of assistance in guiding you through these new challenges.
This article was prepared by:
MATTHEW T. DUFFY
This article represents general information and is not legal advice. Please contact us if you would like legal advice that is tailored to your particular circumstances. We would be happy to help.