Posted In: Insurance Recovery
Insurance Blog: Helping Your Business Survive Coronavirus: Civil Authority Coverage
on March 18, 2020
As the economic impact of Coronavirus continues to unfold, businesses across Ohio are now treading unchartered waters with no clear path to the shore. The interruption in production and in supply chains due to travel restrictions, and the shutdown of overseas operations are hitting home, while local bans on public gatherings, and shut-downs of gyms, courts, schools, and most recently, in-house dining at bars and restaurants, are now further limiting commerce. Additionally, mandated closure of child care centers and potential quarantines and curfews are reportedly imminent. Although state and federal relief may be on the way to help businesses during this time, businesses should also review their insurance programs closely.
Generally business interruption coverage in your property policy is the most likely place to find coverage for lost business attributed to Coronavirus. However, where there is no evidence that a particular premises or equipment has been exposed, it may be difficult in some jurisdictions to establish “property damage” as required by most policies. As new governmental orders are issued restricting access to your business, however, the door to other coverage grants, including Civil Authority coverage, may be opened.
Civil Authority coverage is typically found within the policyholder’s business interruption provisions and generally extends coverage for business interruption where access to the premises is prohibited due to orders of civil or military authority. Different forms vary in their requirements necessary to trigger coverage. A more restrictive Civil Authority coverage grant, for example, may provide:
(1) Access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage, and the described premises are within that area but are not more than one mile from the damaged property; and
(2) The action of civil authority is taken in response to dangerous physical conditions resulting from the damage or continuation of the Covered Cause of Loss that caused the damage, or the action is taken to enable a civil authority to have unimpeded access to the damaged property.
Some forms, however, are broader and do not tie coverage to direct physical damage. For example, a form might provide:
- The civil order must be mandatory and must deny access; an order that is “advisory” or “voluntary” or one that simply makes accessibility more difficult is typically insufficient;
- Coverage may be subject to sublimits and/or temporal limits; and
- The loss of income must be at least proximately caused by the civil order, not just the threatening event itself.
This blog is intended to provide information generally and to identify general legal requirements. It is not intended as a form of, or as a substitute for legal advice. Such advice should always come from in-house or retained counsel. Moreover, if this Blog in any way seems to contradict advice of counsel, counsel's opinion should control over anything written herein. No attorney client relationship is created or implied by this Blog. © 2024 Brouse McDowell. All rights reserved.