Like many other insurance agents, Dan Morse has been fielding dozens of questions from commercial clients as the coronavirus crisis has mounted. If my restaurant has to close, am I covered? If nobody wants the employees of my renovation business in their houses, do I have a claim?
The answers, Morse says, have not been what the callers hoped for: “There’s basically no coverage for what is going on with this coronavirus,” said Morse, president of Morse Insurance Agency in Easton. Still, he’s encouraging customers to document their losses anyway, cognizant that under such unique circumstances, things can change quickly “when the rubber meets the road.”
While companies large and small carry insurance for catastrophic business disruptions, insurance companies say the costs of cancellations and closures related to COVID-19 are generally not covered.
But clients, some facing financial ruin, are unlikely to take no for an answer.
The obligations of insurers in this crisis will probably be debated by courts and regulators for years, as businesses try to recoup the billions of dollars they have lost as the economy grinds to a halt.
“There is going to be a great hue and cry from the business community and the government for the insurance companies to pay something," said David F. D’Alessandro, a former John Hancock chief executive.
Insurance companies say business interruption insurance is designed not for global pandemics, but for situations such as fires and natural disasters that physically affect a specific workplace.
And some insurers have moved to specifically exclude pandemics from regular business interruption policies in the years since the frightening 2003 outbreak of the respiratory virus SARS. But those exclusions are far from universal, industry observers say, and the wording of policies varies widely.
“Nobody should assume, just because they read that the insurance company says that, that their policy bars coverage for this,” said Finley T. Harckham, an attorney at the New York law firm Anderson Kill who focuses on business interruption insurance. “Many policies do not.”
For policies that don’t expressly prohibit losses from a pandemic, Harckham said, clients may be able to make a case for coverage based on the particular details of their policies.
Businesses often have coverage for damaging economic effects felt not just at their place of business, but at other companies that they rely on. Harckham said that could potentially refer to disruptions at transit agencies, or at crucial vendors that are unable to function during the outbreak. Some have policies to pay for losses associated with civil orders such as evacuations or shelter-in-place requirements, though those often hinge on there being physical damage in the policyholder’s area.
A key point of dispute is likely to be whether the presence of a virus in a community or a specific workplace counts as physical damage. A virus, however small, is a real object that affects the material world. Certain policies have exceptions for infectious diseases, but D’Alessandro said policyholders could argue that those are in place to prevent companies from getting payouts for their own sanitation failures.
“The claim will be that this is physical damage to my property, through no fault of my own, that endangers my employees and my customers,” D’Alessandro said.
He expects insurance regulators to have something to say about how this question should be interpreted, and that could vary widely by state. Ultimately, he said, there’s likely to be a huge number of legal disputes in courts around the country.
D’Alessandro said one possibility would be for the government to order the creation of a fund that would cover at least a portion of businesses’ losses while insulating the insurers from collapsing under the weight of the claims.
Meanwhile, businesses are trying to cope with the likelihood of huge losses that they may never be able to recover.
“Obviously, there will be huge government bailouts, but I don’t know if it will ever help small people like me,” said Bill Blumenreich, who runs the Wilbur Theatre in Boston and the Chevalier Theatre in Medford. He’s had to call off or postpone events at those venues and elsewhere amid bans on large gatherings imposed to combat the spread of COVID-19.
He says his losses will reach into the millions, and he’s not optimistic that insurance will help. “For something like this, I don’t have any,” Bluemenreich said.
Eric Michelson, co-owner of Michelson’s Shoes in Lexington, has been watching with alarm for weeks as customer visits have evaporated. The store is still open, but anticipating the possibility of a government-ordered closure, he has contacted his insurance agents.
He doesn’t have coverage for civil orders, and his policy has an exception for viruses or bacteria. Michelson said he’s holding out hope for government relief.
“You buy insurance and you never expect it to cover your specific need, because that’s just the way the insurance companies do it,” he said. “It’s sad but true.”
George W. Shuster Jr., a Boston-based partner with WilmerHale who is working on the law firm’s coronavirus task force, said it would be unwise to rely on the insurance industry alone, given the scope of the economic damage.
He said business interruption insurance is a way for businesses to pool their risk so that any one of them would be covered by an individual loss.
“They are generally not geared toward countrywide issues or things of such a massive scale that every business would suffer equally,” Shuster said.
Shirley Leung of the Globe staff contributed to this report.