Insurance commissioners in at least seven states have advised business owners not to get their hopes up if pursuing business interruption claims.

Scott Seaman, a partner with the Hinshaw & Culbertson law firm in Chicago, posted a blog on Friday that relayed communications from insurance commissioners in Georgia, Kansas, Louisiana, Maryland, Mississippi, North Carolina, West Virginia and the District of Columbia. All of them expressed various degrees of doubt as to whether business interruption coverage is owed for losses caused by coronavirus shutdowns.

An April 17 letter by North Carolina Insurance Commissioner Mike Causey was perhaps the most direct.

“Standard business interruption policies are not designed to provide coverage for viruses, diseases, or pandemic-related losses because of the magnitude of the potential losses,” Causey said. “Insurability requires that loss events are due to chance and that potential losses are not too heavily concentrated or catastrophic. This is not possible if everyone in the risk pool is subject to the same loss at the same time.”

Causey’s letter repeated an assertion made March 26 by the Association of Property and Casualty Insurance that business-closure losses for employers with fewer than 100 workers would total $220 billion to $383 billion per month. The APCI on April 6 updated those projected monthly losses to between $255 billion and $431 billion. But the group estimated all losses, not just those suffered by businesses that had purchased business interruption coverage.

“This type of loss could cripple the insurance industry, causing many companies to fail, which would put the protection of homes, automobiles and businesses at risk,” Causey said, echoing the APCI’s talking points.

A post by Louisiana Insurance Commissioner Jim Donelon’s office was less broad but still repeated an assertion made by many insurance defense attorneys; that is, a virus is typically not a covered peril in commercial property insurance policies. A Frequently Asked Questions notice by the Department of Insurance said it reviewed the policy forms of seven admitted insurers offering business interruption insurance in Louisiana, as well as the policy forms of Insurance Services Office and the American Association of Insurance Service.

Insurance Departments in Kansas, Maryland, Mississippi, West Virginia and the District of Columbia posted notices that losses from coronavirus shutdowns usually won’t be covered, either because of specific exclusions or because virus is not specifically listed as a covered peril.

Georgia Insurance Commissioner John F. King was among the first to a stake a position on the business interruption issue. He issued a bulletin on March 17 stating that most insurance policies will not cover losses caused by coronavirus shutdowns. Even policies that provide additional coverage for losses caused by closures ordered by civil authorities might not bring relief, King said.

“If the policy requires physical damage to adjacent or nearby property and the insured cannot establish a causal connection between the government order and that physical damage, there there like will be no coverage,” the bulletin says.

Of course, attorneys for business owners across the country are arguing in lawsuits against insurance carriers that the novel coronavirus does cause the type of physical damage that triggers coverage. A group of businesses represented by attorneys in Philadelphia and another group with attorneys in Chicago have petitioned the federal Judicial Panel on Multidistrict Litigation to consolidate similar lawsuits so that common questions — such as whether coronavirus constitutes physical damage — can be resolved by a single judge.

Communications from some insurance commissioners were more circumspect on the issue of whether covered is owed.

The Missouri Department of Insurance, for example, stated on a consumer alert: “The industry trend has been to exclude business interruption coverage for viruses, bacteria, pandemic, communicable diseases, etc., but this may not be universal.”

The Washington Department of Insurance posted a notice stating that business interruption coverage for coronavirus is “questionable,” but it depends on the terms of specific policies. Later, Insurance Commissioner Mike Kreidler surveyed insurers to find out whether any of their policies covered a pandemic. He reported on April 17 that only two insurers offered coverage for a pandemic event and 15 offered limited coverage endorsements to standard policies.

Kreidler said the insurers reported more than 194,000 commercial policies had at least one type of business interruption or civil authority coverage in effect as of March 15, with an estimated premium totaling $437 million.

“I have heard from countless business owners asking if their policies cover economic loss due to the coronavirus pandemic and the state’s Stay Home, Stay Healthy order,” Kreider said. “Unfortunately, the answer I got from insurers in Washington state is that the vast majority specifically exclude coverage for economic loss due to a viral pandemic.”

Even if they’ve already made up their minds on the question, carriers that insure businesses in California won’t be able to say “no” to their policyholders easily. On April 14, Insurance Commissioner Ricardo Lara issued a directive requiring insurers to investigate every business interruption and event cancellation claim received.

Lara said he issued the order because he had received numerous complaints that agents, brokers and insurance company representatives had attempted to dissuade policyholders from filing claims.

*This story ran previously in our sister publication Claims Journal.