Life and business insurance in the time of COVID-19 Part 2

April 09, 2020, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

The last post dealt with commercial property insurance in general – today we will deal more specifically with Commercial Property Insurance, and Business Interruption Policies. Business owners often purchase insurance without being fully aware of their own potential needs, nor of the specific restrictions found within policies. No one could have foreseen the massive and widespread impacts of a pandemic occurring, and certainly most would not have expected it to occur in their life time.

Commercial property insurance can include a business interruption rider. This may cover loss of income, your employee wages, and clean up expenses in the event of a covered incident. The key being what incidents are covered. Generally speaking, the commercial property insurance compensates and protects the insured in the even of physical loss or damage to a covered property, and may also include coverage protecting owners from income loss sue to the physical loss or damage of property.

Historically this loss or physical damage has been interpreted to be a result of a natural disaster such as an earthquake, fire, flood, etc. Closure and decontamination/clean up due to a staff member having COVID-19 may be covered for the period it takes to rectify the situation. Whether COVID-19 related contamination clean up and resulting temporary closure is covered is dependant upon the nature of the business and any specific negotiations that would have occurred while the policy was written. We know that policies are regularly negotiated and depending upon the nature of the business and the risk tolerance of the individual owners the policy may include and infectious disease extension.

After the SARS outbreak a few insurance companies did begin to offer this type of coverage. After the SARS, Ebola and H1N1 outbreaks many commercial policies restricted claims for this kind of loss. The key will be to read your policy in its entirety. If it is ambiguous local law and previous court decisions may help guide you as to whether non-physical damage from infectious outbreaks (the pandemic) qualify as an interruption insurance loss.

Again, depending on the policy and the laws in effect business loss and expenses may be covered though law provisions that indemnify business in the event that government action interferes with operations, including laws that force mandatory closure of the business. Many policies limit coverage when closure is a result of government action. Again, the policy must be read carefully. The concern is whether the policy is clear or is it broad enough to cover situations beyond the underwriters’ intentions.

When reading the policy, it is imperative to examine the endorsement on civil authority. Key phrases such as, “…insures loss, as covered herein, which is sustained by the Insured as a result of damage caused by order of civil authority to retard or prevent a conflagration or other catastrophe.”. Interpretation and the definitions of words like conflagration or catastrophe will be key. Do they include or exclude a virus such as COVID-19? In the American courts we have begun to see challenges on this point. The American government is also pressuring insurers to include viral threats in these definitions.

Another consideration when looking for coverage would be Contingent Business Interruption Coverage. This typically compensates a business owner in the event that a vendor fails to meet its supply obligations. Generally this policy requires that the vendor have suffered a direct physical loss or damage that made it impossible for them to meet contracted supply obligations. Interpretation of the policy, and careful reading of it may allow coverage from a COVID-19 related loss.

If you are considering a claim on the basis of business interruption due to COVID-19 be certain to read your policy carefully and to consult a lawyer. There are already challenges to policies in court in America, and new interpretations being made there. It is only a matter of time before that occurs here in Canada.


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Deutschmann Law serves South-Western Ontario with offices in Kitchener-Waterloo, Cambridge, Woodstock, Brantford, Stratford and Ayr. The law practice of Robert Deutschmann focuses almost exclusively in personal injury and disability insurance matters. For more information, please visit or call us toll-free at 1-866-414-4878.

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