COVID-19, Business Interruption Insurance, and Civil Authority Coverage in Colorado

Many Business Owner’s and Commercial Property insurance policies include business interruption insurance coverage (or business income insurance coverage).  This coverage is designed to provide businesses with replacement income during periods in which the business is closed (or suffers a slowdown) as a result of covered property damage.  Often, business income insurance also provides coverage in the event the policyholder suffers a closure or slowdown as a result of an action by a civil authority.

What is civil authority coverage?

The purpose of these “civil authority” provisions is to ensure the financial stability of a business that suffers a slowdown as a result of damage to a nearby property.  For example, consider a retail store located in a mall.  If there is a hailstorm that damages the mall’s glass ceilings, it may be unsafe for shoppers to travel to the retail store.  If the fire department issues an order prohibiting shoppers from entering the mall, then the store owner will suffer a slowdown in business, even though his or her shop is not physically damaged.  Without a civil authority provision, the insurance company could argue that there is no coverage because the policyholder’s property did not suffer physical loss or damage.

Could Colorado businesses have civil authority coverage?

During the early phases of this pandemic, Colorado’s stay at home orders primarily focused on direct person to person spread of COVID-19.  However, as the science has evolved, Governor Polis has expanded the bases for his executive orders.  What does that mean?  On March 25, 2020, Governor Polis signed Executive Order D 2020-017, ordering Coloradoans to stay at home to reduce the spread of COVID-19.  In that order, Governor Polis wrote that “The virus that causes COVID-19 is spread primarily by close contact between people and through respiratory droplets when an infected person coughs or sneezes.”  In other words, the initial basis for his stay-at-home order was to prevent person-to-person transmission.  However, on April 6, 2020, Governor Polis extended his stay-at-home order.  That order (Executive Order D 2020-24) stated “COVID-19 also physically contributes to property loss, contamination, and damage due to its propensity to attach to surfaces for prolonged periods of time.”  Consequently, there may be coverage available for COVID-19 claims in Colorado where none existed prior to April 6.

The only way to know whether your policy will cover business income losses resulting from COVID-19 is a careful analysis of the policy language.  The lawyers at Ogborn Mihm are prepared to help you determine whether your policy may provide coverage for your business losses.  If it does, we can help you make your business interruption claim. Contact us (303) 592-5900 today for more information.