A few days ago, I published this article about whether business income coverage applies to the coronavirus pandemic:

Business Income Insurance…Does It Cover Coronavirus Shutdowns?

The conclusion of this article was that there is likely little or no coverage under most business income forms. Today, someone asked me about coverage under the “THREE” policy offered by Berkshire Hathaway. I wrote about the bizaarrity (I think I just invented that word) of the “THREE” policy just over a year ago:

From 2.0 to 3

This products purports to provide property, business income, general liability, professional liability, auto, D&O, cyber, auto, and workers compensation coverage in a policy form that is…get this…JUST 3 PAGES long.  Could the “THREE” policy cover business income losses arising from a pandemic? Here is the policy:

The “THREE” Policy

Let’s see what the policy says (or, really, doesn’t say) with regard to pandemics….

This appears to be the insuring agreement for business income coverage:

As a direct result of a loss this policy covers, your business may have increased operating expenses or lose net income….

We will also pay necessary costs to keep your business going or to minimize the time it is out of business after a loss that we cover. We will pay these expenses until listed vehicles are repaired or replaced (or until the Listed Limit for that damaged vehicle is reached) or your business has resumed at a new permanent location (or until either limit for Business Interruption has been reached).

Bizarrely, this says that coverage, up to the declared limit, applies until the business “has resumed at a new permanent location.” Reading that literally, there is no coverage expiration until or unless the business actually moves to another location, something highly unlikely to happen.

This appears to be the only specific exclusion applying to business income coverage:

We do not cover any damage to property (or Business Interruption), nor any claim made against your business, that is caused by pollution, asbestos, or a nuclear event. Pollution means damage caused by the spreading or escape or presence of any contaminant (whether it is solid, liquid or gas), including chemicals and waste. Asbestos means the presence or escape of any asbestos at all. Nuclear means nuclear reaction or radiation or radioactive contamination, however caused.

This seems to imply that business income coverage is triggered by “damage to property” but it doesn’t actually say that. The insuring agreement simply says that business income coverage is triggered by “a loss that we cover” (without saying exactly what that is) and the exclusionary language simply refers to what is NOT covered…a loss involving damage to property caused by pollution (and some jurisdictions do not consider viral contamination to be pollution). It doesn’t actually say that, otherwise, there must be damage to property to trigger business income coverage. Note too that, unlike most business income coverage forms, there is no requirement at all for “direct physical” loss or damage.

This appears to be a governing condition for business income coverage:

We ask that your business take all reasonable steps to protect itself and its property after a loss….

If your business does not meet its obligations to us, your business may lose some or all coverage under this policy.

I’m assuming this is where the “THREE” adjuster will seek to limit coverage. Exactly what does this condition really mean and how could the insured lose some or all coverage? Because the policy is only three pages long, who knows? Presumably the courts will determine coverage as necessary.

Because this policy lacks the specificity in language usually found in most insurance policies, I see no inarguable exclusion for business income coverage for the coronavirus pandemic unless a case can be made for the virus being a pollutant.

Perhaps this is why the “THREE” policy is being underwritten by a smaller separate insurer in the company group? Insolvency due to having to pay many thousands of pandemic claims will only affect this insurer and, of course, other insurers who support state guaranty funds.


Photo by Pirate Alice

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information