The coronavirus is proving costly for global business—and insurance won’t be much help.
With large parts of China in lockdown and other Asian countries on high alert, the virus, which causes an acute respiratory disease called Covid-19, has disrupted shops, hotels, airlines, factories and much else. Multinationals including Apple and Starbucks have closed many outlets in mainland China.
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It has some companies poring over insurance policies in hopes of filing a claim for losses from business interruptions. “We are getting lots of questions about it,” said Gisele Norris, a strategic account manager at insurance broker and consultant Aon PLC, and co-leader of its global infectious disease task force.

The odds aren’t great. Insurers and reinsurers learned a costly lesson from severe acute respiratory syndrome in 2002-03. In Hong Kong, HK$325 million ($41.8 million) was claimed for business interruptions from SARS; hotel chain Mandarin Oriental International Ltd. alone recouped US$16 million from its insurers, led by American International GroupInc.

Now insurers across the board exclude epidemics in standard business-interruption policies, which mainly cover property damage from events such as fire, terrorism and natural catastrophes.

On 11 March 2020, the World Health Organization officially characterized COVID-19 as a pandemic, raising the health emergency to its highest level. The situation appears ominous as the number of cases of the virus has increased exponentially globally, with about 114 countries affected. Currently, while the increase appears to be have slowed significantly in China, other countries are now experiencing worrying signs of community outbreak. In the past two weeks, the number of cases outside China has increased 13-fold.
Countries are implementing unprecedented measures to curb the spread of the virus, including cancelling all mass gatherings, closing schools and public facilities, and suspending non-essential travel from high-risk countries as well as quarantine measures. The outbreak has already had an impact on many businesses and the measures undertaken are compounding the challenges these businesses are facing. From an insurance perspective implications for various lines include travel, medical, credit, event cancellation and business interruption. As businesses struggle to pay bills, insolvencies will increase and this will impact trade credit insurers. Certain travel insurers in the UK have withdrawn cover for future coronavirus claims. This legal update however will focus on business interruption insurance and event cancellation. 
(i) Business Interruption Insurance
Businesses often insure against the risk of material damage to property, including risk of business interruptions arising from such property damage resulting in partial or total closure of the business, which in turn leads to loss of profits. Insurance against such losses is often called “business interruption” insurance (BI). 

The Coronavirus Disease 2019 (COVID-19), is the latest viral outbreak affecting the physical and economic health of the world. With a global impact and over 1,600 reported cases identified in the United States (as of the date of this bulletin), the World Health Organization classified the outbreak as a pandemic on March 11, 2020.
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COVID-19 belongs to the same classification of viruses which caused Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS) and has already had a significant impact on business operations throughout the country as state, local and national governments have declared states of emergencies, which include, halting of trade with China, cancellation of some domestic and international flights, closing of schools and public gathering places and many more daily disruptions that have had a swift impact on individuals and businesses.

As COVID-19 continues to spread across the United States and world, commercial tenants and landlords, as well as buyers and sellers of real estate will encounter challenges in meeting contractual obligations due to the fluid nature of the outbreak and governments’ continued and ever-evolving attempts to contain it.  Landlords and tenants are actively analyzing the impact on supply chain reductions and decreased retail traffic due to “social distancing” mandates.  Buyers and sellers face the possibility of travel restrictions preventing on-site third party due diligence review and site inspections as well as standard tenant interviews.  Additionally, the containment efforts may disrupt debt availability from local and regional lending institutions and cause a possible back log of deed and mortgage filings in the event state and municipal government recording offices are required to close their doors.  Relevant questions companies should address are (i) whether the failure to perform contractual obligations due to COVID-19 related causes constitutes a breach of contract or default, (ii) whether there is an exemption under contractual force majeure provisions for such pandemic causes, (iii) whether government or quasi-government (Civil Authority) directed closures and shut downs due to COVID-19 are covered by insurance and (iv) whether events caused by or related to COVID-19 constitute a material adverse change under the terms of a contract.

Force Majeure, Insurance, MAC Clauses are further discussed in this article.

Business Property Insurance
If you have some form of casualty insurance on property and equipment used in
your business, contact your insurance company or agent as soon as possible to notify them of losses to your covered business property. Photograph or videotape the damage to your business and space where it operates, as well as damage to your records, inventory, equipment, and any other loss.

Commercial Lease
Notify the landlord as soon as possible in writing if your leased property is damaged and if your
business was shut down as a result of disaster. Review your lease to determine whether it terminates or if there is a provision for rent reduction during a business interruption. If your lease doesn’t provide for temporary rent reduction, try to negotiate one with your landlord.

Contractual Obligations
As a small business owner, you may have ongoing business obligations to vendors,
suppliers and customers while your business operations are interrupted. Whether your obligations may be suspended or terminated depends on the terms of the contract between you and those with whom you do business. Start by reviewing the contract.