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COVID-19 Canada: If A Policy Doesn’t Cover Business Interruption, Can The Government Say It Does? – Coronavirus (COVID-19) – Canada – Mondaq News Alerts

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While the full extent of the economic toll of the COVID-19
pandemic remains uncertain, there can be no doubt that business has
been “interrupted”. However, whether that
“interruption” is insured, is another question

As has been reported in countless news bulletins and articles in
the past few months, the typical trigger for business interruption
coverage is physical damage. What remains to be seen is whether the
presence of Covid-19 on a surface will satisfy that prerequisite; a
question that has already spawned coverage litigation in the US
(see, for example Cajun Conti v. Lloyd’s
1). However, even if a court decides that the answer to
that question is “yes”, there is a distinction, with a
difference, between the presence of Covid-19 being considered
physical damage to property and an individual insured establishing
that there was, in fact, Covid-19 present at their establishment.
It is not unreasonable, or unexpected, for an insurer to expect an
insured to prove their loss.

However, in unprecedented times, governments may take
unprecedented actions.

For example, the New Jersey and Ohio state legislatures have
both introduced bills that, if passed, would effectively deem any
business interruption insurance policy that was in force when the
Covid-19 state of emergency was declared, and which was issued to a
business with fewer than 100 eligible employees, to
include coverage for business interruption losses due to
the pandemic, even where such coverage is not explicitly included
and, presumably, even where such coverage is explicitly
excluded (see, for example, the ISO form for
“Exclusion for Loss Due To Virus Or Bacteria”).

While both bills provide that an insurer who pays a claim under
the deeming provision may apply for “relief and
reimbursement”, the availability of “relief and
reimbursement” for insurers will not eliminate the basic
coverage issue of whether the presence of Covid-19 satisfies a
policy’s physical damage prerequisite. It may just mean that
insurers are having this debate with their state regulators as
opposed to their policyholders.

It is also notable that the “relief and reimbursement”
funds will come -at least in part- from an assessment
levied on insurers who write business in the state. That is, these
deeming provisions (if passed) will impact every
insurer- whether they wrote business interruption, or

To date, none of the Canadian provinces have intimated that
something similar is being considered here. However, in times of
crisis, the threat of government interference is not unknown to
Canadians. After the Fort McMurray wildfire in 2016, the Alberta
government urged the insurance industry to extend the time that
insureds had to file claims against them. In making its plea to the
industry, the Alberta government was clear that it would amend its
legislation if insurers did not agree. As stated by then President
of the Treasury Board and Minister of Finance, Joe Ceci:
“Should a company choose not to grant this extension, our
government is ready and prepared to amend the legislation to ensure
residents are being treated fairly and given the additional year to
resolve their claims or file legal action.” 5

While there may seem a wide delta between legislating the
extension of a filing deadline and paying otherwise uncovered
claims, the one thing we can all agree on is that we are in
uncharted territory.

Clyde & Co has deep expertise in providing the insurance
industry with coverage and wording advice. Should you have any
questions or concerns with respect to the COVID-19 pandemic and
your policy wordings, please contact Heather at


1 Cajun Conti, LLC, et al. v. Certain Underwriters at
Lloyd’s London
, et al., No. 2020-02558,
complaint filed (La. Dist. Ct., Orleans Parish Mar. 16, 2020)
(Cajun Conti v. Lloyd’s).

2 A.
3844, 219th Leg. (N.J. 2020).

H.B. No. 589, 113th Gen. Assemb. (Ohio,

4 ISO form CP 01 40 07 06.

Hamilton, J. (2018, May 23). Ceci clarifies: Blanket extension
on all wildfire insurance claims.
My McMurray.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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