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Why “Pandemic” is NOT Excluded in the Business Income Policy

Author: Chris Boggs

Lawyers, legislators and the media, in their individual attempts to rewrite the business income policy, have a keen interest in and take perverse pleasure in pointing out that the business income policy does not contain a “pandemic" exclusion. Even President Trump made this point in one of his briefings.

Without question they are correct. There is no pandemic exclusion in the business income policy. I concede the point.

However, there doesn't need to be a “pandemic" exclusion in the business income policy. The absence of the word or an exclusion containing the word does not change the facts of coverage. In fact, adding a “pandemic" exclusion would be deceitful and regulators would disapprove the attempt immediately upon filing.

A pandemic exclusion is unnecessary and ultimately disingenuous for one key reason – a pandemic is not a peril. “Pandemic" is the term used to describe how widely a biological condition has spread, where it is – nothing else.

Property insurance policies respond when the loss or damage is caused by a covered “peril." A peril is defined as the undesired event that causes loss or damage. In property insurance a peril arises from physical, chemical or biological events that alter the physical characteristics of property such that repair is required. When a biological condition extends into several countries, that is a pandemic.

In short, a “pandemic" cannot cause a loss. Something that cannot cause a loss does not need to be excluded.

Last Updated:  April 24, 2020




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