Business Insurance in the Face of COVID: An Overview

By: Isabel Malmazada, Phillips Nizer Summer Associate

The COVID-19 pandemic has turned the business world on its head. Now more than ever, with the pandemic still at large and the civil unrest ongoing in the country, businesses and insurance companies will be reviewing their policies closely and determining if a business has insurance coverage, and the extent of such coverage. Commercial insurance is designed to protect businesses, both small and large, against events that may cause a loss of revenue. However, the extent of coverage and the willingness of an insurance company to cover a loss depends on the type policy issued and the details of that policy. It is therefore important to understand the different type of insurance policies that are available to business owners.

A business owner policy (“BOP”) is a general type of commercial policy targeted towards smaller and medium sized businesses. It combines both property and liability coverage under one policy. A BOP offers general liability insurance, which protects against liabilities such as customer injury and damage to property of others at physical locations. A BOP also covers commercial buildings and movable property owned by and used for the business itself.  If a business owner wants broader coverage, he or she will need to purchase additional policies.

One option is a commercial package policy (“CPP”). A CPP is a customized package comprised of two or more business insurance coverages bundled together. It allows a business owner greater flexibility in tailoring the coverage to his or her specific needs. A typical CPP will contain property and liability coverage similar to a BOP, but may also include automobile coverage, crime protection insurance, and inland marine coverage. Auto policies protect business vehicles and drivers; crime insurance covers property crimes such as theft, burglary, and robbery of money, securities, stock and fixtures by employees; and inland marine covers items in transit.

Each one of these specific add-ons will increase the total annual premium paid by the insured. Smaller businesses in particular may therefore be tempted to decline some of this additional coverage. However, as the pandemic and the recent civil disturbances have shown, during times of serious crisis, business owners need coverage for all types of situations. These include, for example, potential destruction to retail properties or to the business’s vehicles resulting from rioting or demonstrations.

Commercial insurance is often customized to meet the specific needs of large businesses. These businesses usually have their own risk management departments dedicated to evaluating the cost of insurance coverage in relation to analyses of the potential accidents and losses, recommending and implementing preventive measures, and devising plans to minimize costs and damage should a loss occur.

 The pandemic and the civil unrest are unforeseen circumstances, which affect many small businesses disproportionately compared to bigger businesses. Larger businesses have more capital and more comprehensive insurance policies that enable them to work through these difficult times more successfully.  Many small business owners have learned to their dismay that they were not adequately covered, which will inevitably prevent them from reopening, while many larger businesses will more easily absorb their huge revenue losses and survive.