The COVID-19 Pandemic and Insurance Coverage for Business Interruption in Canada

Abstract

This article explores the impact of the COVID-19 pandemic on the insurance industry and analyzes whether most Canadian businesses are insured for business interruptions and losses caused by the pandemic. The author suggests that pandemic-related losses are insurable. Insurers have had sufficient time and experience to prepare and model their policies to account for events such as the COVID-19 pandemic. Insurance policies typically protect against risks which are triggered only where a business suffers “direct physical loss of, or damage to” property. Ultimately, whether Canadian businesses are insured against COVID-19 business interruptions will depend on how the courts interpret “direct physical loss of, or damage to, property” in the context of pandemic-related losses. The author cautions against engaging in a literalist or dictionary-focused interpretation of insurance policies. Instead, the author argues that equitable and predictable insurance coverage determinations requires a contextual assessment grounded in the role of insurance as a risk-based financial instrument.