Background. Business interruption insurance is typically included in a business insurance program. Our defence of the Lloyd's Market in the two primary class actions in Canada related to COVID-19 — Workman Optometry in Ontario and Wataga Properties in Alberta — highlights one widely held misunderstanding about business interruption insurance: that it provides coverage during a pandemic. In fact, the standard wording in most business interruption policies makes it clear that coverage applies only after a catastrophic event results in some kind of physical damage that prevents an insured from conducting business.

Impact. From the insured's perspective, the consequences of a fire or flood are the same as a government-mandated lockdown that shutters their business for months. The devil is in the details, but many businesses that lack internal risk management expertise may not understand what is covered and excluded in their policy. COVID-19 has led to some nasty surprises for these businesses. Because this is a global problem, the Lloyd's Market is proactively working with local governments to see if a more effective alternative to insurance exists for addressing future pandemics. We also expect insurers to make their policies more clear about communicable disease exclusions.

Top tip.  No business owner wants a nasty surprise when they go to make a claim. Review your coverage annually with your insurance broker and don't shy away from tough conversations and what-if scenarios. Businesses can't assume that lost revenue from government-mandated restrictions will be covered by business interruption insurance, so discuss your options for separate coverage.

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