Can the COVID-19 virus cause ‘direct physical loss’ to an insured business thus triggering coverage under a commercial business interruption policy of insurance?

That is the question percolating through state and federal courts across the country, with no clear answer.

Initial court cases overwhelmingly answered in the negative, resulting in an insurance industry narrative that COVID-19 business interruption losses cannot be recovered under the terms of most commercial property insurance policies.

But recently, policyholders have experienced wins in courtrooms across the country, proving pandemic related claims are not one-size fits all.

Commercial business interruption policies often contain business income coverage, which is intended to help a business recover expenses and replace lost income when a covered loss forces the business to shut down. Business income coverage generally requires that a business suspension be caused by a ‘direct physical loss’ caused by or resulting from a covered loss.