April 07, 2020, Kitchener, Ontario
Posted by: Robert Deutschmann, Personal Injury Lawyer
We have all seen life change dramatically since the global pandemic of COVID-19 was declared on March 11. The province of Ontario and the Government of Canada acted swiftly closing all schools, universities and colleges. Non-essential business were closed next along with parks, playgrounds and wilderness areas. International borders have been all but closed. Provinces have moved to limit ingress. Many provinces have limited the number of people allowed to gather to numbers as small as 5 in Ontario. People are being told to #StayAtHome to slow the spread of the virus.
As the situation has worsened even more businesses have been declared non-essential and forced to close. Those remaining open are operating under a much-restricted manner with limited hours and strict health and public separation measures in place. States of emergency have been declared in provinces and municipalities through the country. The federal government has begun with $82 Billion support fund for employers and employees. Millions of Canadians are out of work and out of school. Hospitals are filling up. Manufacturing companies are re-tooling to make much needed medical supplies.
The result of all of the closures and restrictions has been devastating to the small and medium businesses that support that Canadian economy. Public commerce has ceased to function for the most part. Grocery and drug stores are doing record business but nearly every business sector is hemorrhaging cash. Hair salons to museums, theatres and restaurants, optometrists to dentists, all have closed and millions of employees are at home sitting idly indefinitely.
The bills for these businesses continue to mount though. Rent, mortgages, loans, overhead, credit card bills and supply bills continue to mount into interest bearing weights on the owners’ necks. How long small businesses can hold out is anyone’s guess. How much real relief will be provided by the banks is another guess.
Many small businesses are now looking to their insurance to see whether they can find some help there. Business Interruption Insurance sounds good, as most insurance does, however, the devil is in the details of the policies themselves. Some businesses bought pandemic coverage which was introduced by a few companies after SARS but most people are relying in the general commercial policies they purchased.
Commercial general liability insurance (CGL) provides coverage to businesses in the event that a claim by a third party is brought against them. These polices often cover property damage, bodily harm, and any resulting business interruption. These policies must be very carefully read to determine their specific inclusions and exclusions. Many of them specifically exclude organic pathogens actual, alleged or threatened. They exclude loss, cost or expenses arising out of requirements to clean up, remove, neutralize or respond to the effects of organic pathogens. They also often exclude the costs of monitoring or cleaning up such pathogens, and exclude all liability or expenses arising out of actual or alleged failure by insureds to quarantine those affected by the organic pathogens.
Applying this exclusion is based on whether the presence or threat of the organic pathogen caused the loss to occur. Insurers should be carefully reviewing polices to ensure that the language references to viruses are clear and unambiguous. There are many areas that must be carefully examined to determine whether clean ups, disinfecting measures etc trigger even more exclusions.
Commercial property policies protect and compensate insureds against direct physical loss or damage to the covered property. These policies may include a business Interruption insurance which may cover things such as the loss of income, wages for employees, and clean up expenses due to something like COVID-19.
In many policies it is not clear though whether COVID-19 contamination is considered to qualify as a physical loss or damage to property. Traditionally they were considered to protect insured in the event of natural disasters (earth quakes, fire, tornado) that cause actual physical damage to the property. Whether income loss and expenses are covered is left to the wording and interpretation of the policy itself. I will go into the details of commercial property and business interruption policies in my next blog post.