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April 3, 2020

This article is originally a publication of International Risk Management Institute on March 2020. Legal opinions may vary when based on subtle factual differences. All rights reserved.

The novel coronavirus (COVID-19) is a respiratory disease that can result in serious illness or death. It is caused by a new strain of coronavirus not previously identified in humans and easily spreads from person to person. There is currently no approved vaccine or antiviral treatment for this disease.

The coronavirus has spread to every state in the United States, prompting a variety of responses by federal, state, and local civil authorities. Those civil authority actions have included orders recommending social distancing,1 stay-at-home orders,2 closure of bars,3 temporary postponement of medical or dental procedures not necessary to address a medical emergency or to preserve the health and safety of a patient,4 and continuance of court procedures.5

In light of those responses to the COVID-19 pandemic, it seems appropriate to review the requirements of policy provisions that provide coverage for the loss of business income due to the actions of civil authorities. Given the nature of the orders that have been issued, this discussion should be distinguished from those cases where physical damage due to a covered peril results in a lack of access. Although the principles are much the same, the wording of the coverages differs. And, although they are often written in conjunction with each other, the actual wording must be consulted in all claims.

While the current pandemic gives rise to the discussion, the principles also apply in the context of other catastrophes that impact a wide geographic area, such as wildfires, winter storms, or floods. This article examines the questions surrounding loss due to closure or denial of access to insured property that can be attributed to a civil authority order.