Civil Authority Coverage
Businesses that face financial difficulties because they have been required to suspend their operations during the COVID-19 pandemic could be entitled to compensation for any loss of income if they have a business income insurance policy that has civil authority coverage. This type of coverage applies specifically in cases where a government order prevents or impairs access to a business’s premises. Unfortunately, providing the proof that is necessary to successfully file this kind of claim can be an uphill battle, especially at a time when insurers are inundated with claims from their policyholders and courts have yet to provide concrete guidance on whether COVID-19 and similar illnesses constitute physical damage. If your business has been in decline since the beginning of the pandemic and you have a business income insurance policy, it is important to contact an experienced Florida business interruption lawyer who can walk you through your legal options.
What is Civil Authority Coverage?
Businesses that have experienced a loss in income due to the COVID-19 emergency could recover compensation for some of their losses if their business interruption insurance policies include Civil Authority Coverage. This type of coverage applies when a municipal, state, or other government order or action is issued or taken as a result of:
- Physical damage or loss; or
- Perils (insured against) to property that is adjacent to, or within a certain distance of, a policyholder’s premises.
In both cases, a business will only be covered if it can also prove that the specific government order or action prevents, impairs, or prohibits access to their business’s property.
Access to Business Property
When a covered cause of loss results in damage to property that is adjacent to or near a policyholder’s business and the business has suffered a loss of income as a result, the company’s insurer will be obligated to pay for any actual loss of business income, as well as any extra expenses caused by the action of the city or state, but only if:
Access to the area immediately surrounding the damage is barred by the government because of the damage in question and the policyholder’s land is within the area, but not more than one mile from the damaged property; and
The government agency’s action was taken in response to dangerous physical conditions resulting from a covered cause of loss, or the order was taken to enable a city or state agency to obtain unimpeded access to the damaged property.
In prior years, courts have generally interpreted the civil authority provisions in business interruption insurance contracts as not requiring actual physical damage in order to trigger coverage. Instead, coverage is only triggered when a “stay at home” or similar government order, such as a curfew, causes business interruption and financial loss. Civil authority coverage for lost business income typically begins 72 hours after the civil authority’s order and will apply for up to four weeks.