By Ethan Gerber and Patrick Formato



Just as Covid-19 has wreaked havoc on the health of people everywhere the ordered shutdowns are having devastating consequences on businesses across America. Many companies have purchased insurance coverage which specifically covers “Business Interruption”. These policies often cover lost income from events which force a company to close or have limited access. It is vital that businesses preserve their rights and make claims to their carriers – despite some advice by brokers and statements by insurers to the contrary, these claims might be enforcable and become a vital step to the recovery of your business.

There are many policies that include a standard Insurance Services Office (ISO) form that contain exclusions for virus or bacteria. Many policies, however, do not include such an exclusion. Despite the lack of such exclusions, many insurance brokers and carriers have taken the position that there is no coverage – the reasons they give are usually that the policies require “physical damage or loss to property” and that this requires that the property itself was damaged. While that position may prevail, it is not necessarily so for several reasons:

  • Viral infection may be considered a physical loss of or damage to your property: The CDC has noted that a person can contract COVID-19 “by touching a surface or object that has the virus on it and then touching their own mouth, nose or possibly their eyes.”[1]. Various courts have found loss or damage to property under similar circumstances. For example, the United States Court of Appeals for Third Circuit found that the presence of E. coli bacteria in the well of a house could constitute physical loss or damage to a structure[2].
  • Most policies contain a civil authorities clause: – These clauses apply where, after a triggering event, the company has limited or no access to premises by order of a civil authority. On March 22, 2020 Governor Cuomo signed the New York State on PAUSE executive order closing all non-essential businesses. This is similar to what happened in downtown Manhattan after 9/11 when premises that were not destroyed by the terrorist attacks were nonetheless shut down by the authorities; Several courts held that coverage applied under the Civil Authority clause of an insurance contract. [3]
  • Broad interpretations required by State Activity: State regulators are stepping in to make sure that insurance companies are providing all promised coverage and not misleading their insureds. For example, on March 10, 2020 the New York State Department of Financial Services required all insurers to report the volume of business interruption insurance it writes and the amount it receives in premiums from those policies and must explain clearly if the Civil Authority clause would cover the current situation. Moreover, State legislatures, and New York in particular, have legislation pending that would expand the interpretation of coverage to make sure insurers cover losses.[4]
  • E&O Coverage – under some circumstances, a business may have a cause of action against an insurance broker – If an insurance broker misrepresented the type of coverage or if the broker failed to obtain coverage requested, the broker may have their own liability that may be covered under the broker’s Errors and Omission Coverage.[5] If you believe you were misled or didn’t get the coverage you requested, this maybe an option.

Abrams Fensterman is here to assist you – to carefully read your policy, help make the case to the carrier, and where appropriate fight for the right results.

Please Contact: Ethan Gerber, Esq. at or Patrick Formato at


[2] Motorists Mutual Ins. Co. v. Hardinger, 131 F.App’x 823 (3d Cir. 2005).

[3] See e.g. Zurich American Ins. Co. v. ABM Industries, Inc. 397 F.3d 158 ( 2ndCir. 2005).

[4] A. 10226, extends coverage for business interruption during a period of a declared emergency due to the coronavirus pandemic. The New York bill would apply to policies in force by March 7 and issued to businesses with fewer than 100 full-time employees. Other bills are pending in New Jersey, Ohio and California.

[5] Murphy v. Kuhn, 90 N.Y.2d 266 (1997).