Business Interruption Pandemic Cover

Since the Covid-19 outbreak last March, companies across the U.S. have taken a financial hit and many have closed their doors. The restaurant and event industries had to work around strict public safety guidelines, which in some cases wasn’t possible. This resulted in declining revenue, closing up stores that have been open for generations, and furloughing loyal employees. Now, business interruption insurance policyholders are calling for payouts. Historically, to receive money there had to be physical damage to your property. However, according to the Supreme Court, this isn’t strictly true. 

Business Interruption Insurance

Companies that are in areas with a lot of severe weather may opt for business interruption insurance. This insurance covers any income lost during a disaster. The disaster could be a fire, tornado, hurricane, or any other severe weather event that halts business. This policy is typically an addition to a property or casualty policy. It also covers operating expenses, moving costs, payroll, taxes, and loan payments. 

Pandemic Insurance Coverage

A bill filed by Sen. Charles Schwertner would require insurance companies in Texas to cover pandemic losses in business interruption insurance policies. 

Under SB 249, the Senator stipulates that business interruption insurance should “cover loss caused by a pandemic, including loss caused by the order of a civil authority made to prevent the spread of a pandemic, without regard to whether the pandemic caused a direct physical loss to the policyholder’s property.”

The Supreme Court has determined that causation should determine payouts. If the agreed-upon policy previously stated that there had to be damage at the premises, then the insurer isn’t liable. However, if policyholders own a disease or non-damage policy then insurers may need to cover expenses. This verdict has insurance companies rushing to amend their policies to exclude the pandemic. Any payments insurance companies are responsible for and pay are simply due to unforeseen circumstances and poor wording. Most agencies can’t feasibly afford to cover all of the businesses struggling due to the pandemic. Those who previously covered illnesses did so for illnesses that were unlikely to spread far. 


This plan would apply to any insurance company operating within Texas including a county mutual insurance company and a farm mutual insurance company. Critics fear that this policy would topple the insurance industry in Texas. Insurance companies would be forced to increase premiums. More echo that without physical damage it is difficult to make estimates or insure companies.


Previous stipulations with business interruption cover expect physical damage at the premises, although, in some policies, this wasn’t cited explicitly. This loophole could be just what business owners need after hemorrhaging money for the last year. Companies on the brink of bankruptcy may be able to keep their doors open and continue fueling the economy. 

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