On March 20, I wrote an article titled “Business Income Insurance…Does It Cover Coronavirus Shutdowns?” addressing the grounds in what is believed to be the first lawsuit seeking business income coverage for the COVID-19 pandemic in the U.S.

One of the issues is whether the surface contamination of property by a virus triggers the insuring agreement in the policy requiring “direct physical damage.” In the March 20 article, I outline the reasons why I don’t believe that’s the case, but there is one more point I’d like to make.

The lawsuit contends [emphasis added]:

“23. It is clear that contamination of the insured premises by the Coronavirus would be a direct physical loss needing remediation to clean the surfaces of the establishment.”

In other words, the plaintiff asserts that “contamination” is a direct physical loss that triggers coverage. My argument is that mere surface contamination isn’t sufficient in its nature and permanency to constitute direct physical damage. But let’s pretend it is….

In order for coverage to attach under the business income policy form in question (the ISO CP 10 30 10 12 – Causes of Loss Special Form), the direct physical damage must be caused by a Covered Cause of Loss. The CP 10 30 covers any nonexcluded direct physical loss. However, this exclusion appears in the CP 10 30 form:

Discharge, dispersal, seepage, migration, release or escape of “pollutants” unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the “specified causes of loss”. But if the discharge, dispersal, seepage, migration, release or escape of “pollutants” results in a “specified cause of loss”, we will pay for the loss or damage caused by that “specified cause of loss”.

“Specified causes of loss” means the following: fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage.

From the CP 00 30 10 12 – Business Income (And Extra Expense) Coverage Form [emphasis added]:

“Pollutants” means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

In other words, the business income policy excludes a “contaminant” unless it is caused by a “specified causes of loss” and none of the listed “specified causes of loss” include viruses or pandemics.

So, if you assert that viral contamination is a physical loss in order to trigger business income coverage, you must recognize that the policy excludes losses arising from contaminants unless the contamination is caused by one of the listed named perils.

You can’t have a substance be a contaminant in one part of the policy but not a contaminant in another part of the policy. Otherwise, you’re expecting to have your cake and eat it too.


Photo by kennethkonica

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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