Business Interruption Clauses and the Coronavirus: What You Need to Know

a hand stopping domino pieces and COVID-19

The novel Coronavirus (“COVID-19) has affected the whole world in a profound and unprecedented way. Everything from the economy, travel, culture, and even the Olympics have been affected.

Canadian society has been no different.  We’ve all felt it, regardless of where we live. The COVID-19 pandemic has left its mark across Nova Scotia. In some way, regardless of who you are, everybody has been impacted.

In particular, COVID-19 has had drastic ramifications for small businesses across Canada. Regardless of the nature of the business, the COVID-19 pandemic has inevitable left its mark on the economy. This has ramifications on the insurance held by small businesses in several ways.

One likely issue that will arise as a result of COVID 19 is “business interruption clauses” which are part of some first-party commercial insurance policies.

Business interruption clauses are a type of insurance that covers the loss of income that a business suffers after a disaster.

Depending on the wording of the policy, the income loss covered may be due to the accident-related closing of the businesses facilities, covering wage loss for employees, or other forms of financial coverage. Different policies cover different types of disruption-causing events.

For example, in a case out of Ontario, Agro’s Foods Inc. v Economical Mutual Insurance Co, 2016 ONSC 1169, in addition to covering damage to the buildings, the policy contained a business interruption clause that insured “against losses directly resulting from necessary interruption of business caused by destruction or damage by the perils insured against, to buildings”, to a limit of $250,000.

Business Interruption Clauses need to be reviewed carefully to see what types of interruptions are covered, and what exclusions apply. If the policy purchased specifically includes “pandemics” as one of the grounds of coverage, then given the designation from the World Health Organization that COVID-19 is a pandemic, then the Insurer would be obligated to cover losses attributable to the business interruptions caused by COVID-19.

If you believe your business may be in a situation where your insurance policy has a business interruption clause, please reach out to one of our experienced lawyers at Valent Legal. We can do intakes by phone, skype, zoom, facetime, or any alternative form of communication to protect your safety. If you have any questions, call us today.

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