“Civil Authority” Insurance Coverage

Another way a business may seek to address losses from the COVID-19 pandemic is to review insurance coverage to see if there is the possibility of making a claim for “civil authority” coverage. “Civil Authority” coverage is a provision of an insurance policy that attempts to make a business whole that has suffered losses because of government-ordered business closures.

What qualifies as a government-ordered business closure?

Any part of a government, be it federal, state, or local/municipal, may order business closures. In Virginia, for example, Governor Northam has issued several executive orders that have closed many “non-essential” businesses such as health clubs, restaurants, hair salons, etc. due to the coronavirus.

What exactly is “civil authority” coverage?

Insurance policies that have coverage for losses due to government-ordered closures frequently have a clause specifically stating “Civil Authority”. Frequently, it is defined as a loss of business income cause by the action of a civil authority prohibiting access to described premises dueto direct physical loss of or damage to property, other than at the described premises, cause by or resulting from any covered cause of loss. However, a policy may not use these terms – but still have equivalent coverage – so it’s best to carefully review a policy.

Insurance company defenses

An insurer may raise several arguments to preclude “civil authority” coverage. They may state that there wasn’t any “physical damage” to any other property. They may also claim that there was no “prohibition of access” to the insured’s property. They may also claim that a current order that prevents future harm does not qualify for coverage.

Do I really need an attorney to file a claim under my insurance policy?

The case law surrounding this area of the law is unsettled,and as the novel coronavirus is bringing novel facts to the table regarding insurance disputes, having an experienced attorney review your situation could add value. If you decide to do so, David Thomas, Esq. and the attorneys at MichieHamlett have that experience and are ready to assist you.