An Appraisal of the Extent of Business Interruption Insurance Coverage in the Context of the Covid-19 Pandemic

Business interruption insurance covers against losses caused by an interference or interruption of business as a result of circumstances out of the hands of the policyholders, such as natural disasters, particularly fires, earthquakes, floods, or epidemic illnesses. As it is known, during the first wave of the COVID-19 pandemic, many businesses were forced to shut down operations except for online sales, caused by both the severe restrictions of the governments and also contagiousness of the virus. The business owners who could not operate for a long time and incurred a serious loss of earnings appealed to their insurers who provided coverage for business interruption losses depending on agreements that were signed before the pandemic. However, most of these applications were refused by insurers on the grounds that business interruption insurance policies provide coverage only for business interruption losses caused by physical damage. Accordingly, the extent of the business interruption insurance coverage, as well as the meaning and scope of the term "physical damage," has been intensively discussed both in doctrine and also in court decisions after restrictions of the pandemic were lifted. On the other hand, it is a known fact that in many policies used in practice, the parties can add "extension" or "exclusion clauses" into the agreement. This study aims to both determine the coverage possible to be included in business interruption insurance policies, by considering the general insurance terms and conditions frequently used in practice, and also to solve the matter of whether it is possible to indemnify the losses related to business interruption caused by the restrictions and interferences of the COVID-19 pandemic.