A common question is whether business income/business interruption insurance coverage applies if a governmental authority requires a business to close in response to COVID-19 planning. As a business owner, you should review your policy and consult your agent, but the short answer is likely no.

This is not a theoretical question.  In Tucson, Mayor Regina Romero has made the determination that it is in the best interest of maintaining public health to suspend dine-in services in restaurants and food courts, pick up and delivery services remain available.  She has also directed bars, gyms, and other specifically identified venues to close through the end of the month.   

A person who violates this Declaration of Emergency may be found guilty of a Class 1 misdemeanor.  How aggressively this will be enforced remains unclear. 

The authority for this decision comes from two places.  First, A.R.S. 26-311, an Arizona statute that empowers the mayor or chairman of the board of supervisors of an unincorporated portion of a community to take emergency action, including ordering the closure of any business.  Second, the Tucson City Charter empowers the Mayor to take emergency actions such as this. 

Closed businesses are dramatically impacted and looking for relief to stay afloat and to take care their employees. But business interruption coverage is likely not a place to look for relief. Before business income responds, there typically must be damage to property leading to the business closure. This requirement applies to business income dependent property losses and civil authority losses covered by business income policies. Furthermore, there often is a specific policy exclusion applicable to viruses that removes the losses from coverage.

I cannot stress enough the importance of reading the fine print on any specific policy and talking to your insurance agent to fully understand this issue.