Two types of commercial property insurance may cover COVID-19-related income loss for businesses:
- Business interruption coverage, which covers loss of income that results when damage to a business’s property prohibits the business from operating; and
- Contingent business interruption coverage, which covers loss of income that results when damage to a business’s supplier’s property prohibits the business from operating.
To trigger either coverage, “direct physical loss or damage” to property is required.
The Minnesota Court of Appeals has held “physical loss” is not limited to “tangible injury to the physical structure of a building.” Sentinel Mgmt. Co. v. N.H. Ins. Co., 563 N.W.2d 296, 300 (Minn. App. 1997). In Sentinel Mgmt. Co., the Court found asbestos constituted a coverable physical loss, explaining, “Although asbestos contamination does not result in tangible injury to the physical structure of a building, a building’s function may be seriously impaired or destroyed and the property rendered useless by the presence of contaminants.” Id.
Arguably, under Minnesota law, “physical loss” may include contamination by COVID-19. Taken one step further, “physical loss” may also include potential contamination by COVID-19, as Gov. Tim Walz has issued a stay-at-home directive to prevent the spread of the disease.
The first COVID-19-related business interruption case, Cajun Conti, LLC v. Certain Underwriters at Lloyd’s London, was filed on March 16, 2020, in Louisiana state court. The development of the case will provide insight into coverage for businesses that have been required to suspend operations because of COVID-19.
If you are a business seeking insurance coverage for COVID-19-related financial loss, contact Dunlap Seeger.