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Standard insurance for Florida businesses likely won’t cover COVID-19 losses

But state and federal loan programs may provide some relief.
As government-mandated closures move Floridians increasingly out of public spaces, businesses both large and small are left to grapple with ever-diminishing revenue. Pictured is Casa Tina Mexican restaurant, informing people that the establishment closed because of COVID-19. [MARTHA ASENCIO RHINE | Times] [MARTHA ASENCIO RHINE | Times]

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Since the coronavirus outbreak, Darren Vermost has been fielding one question over and over — “Am I covered?”

Vermost is president of Largo-based brokerage the Vermost Insurance Agency. Business owners want to know if they can put in claims from losses due to ever-diminishing crowds since government began telling people to stay home.

“From everything I’ve seen and heard," Vermost said, “most insurance companies are saying, ‘No, it’s not covered.’”

Business interruption insurance, the coverage that companies would typically turn to for lost revenue after an external event, often doesn’t cover lost revenue from a communicable disease. According to Mark Friedlander, Florida representative for insurance group the Insurance Information Institute, it typically provides relief after physical damage, such as from a fire, explosion or hurricane.

Many insurers, Friedlander said, specifically excluded viral and bacterial infections from their business interruption policies after the SARS epidemic in the early 2000s.

“In order to underwrite that, the price point (for policies) would come up so much that most businesses wouldn’t buy it,” Friedlander said.

Just 34 percent of small businesses nationwide have business interruption coverage to begin with, according to the Insurance Information Institute.

Vermost said his clients range from small one-person shops to physician practices and technology firms. While restaurants are some of the most-affected businesses across the state, Vermost said he hasn’t noticed a specific pattern as far as the types of clients who are calling in with coverage questions.

“Everybody is concerned,” he said. “We’ve heard from people that are not our clients as well asking for information.”

Some larger businesses in recent years turned to “surplus” insurance — coverage that goes beyond a standard policy — to hedge against an epidemic or pandemic. But so-called “pandemic insurance” is provided by just a few insurers.

This combination of factors puts small businesses at particular risk of not being able to financially survive the current pandemic.

Last week, several U.S. Representatives sent a letter to four major insurance associations urging their members to cover business interruption claims related to COVID-19. State Rep. Alcee Hastings, D-FL, was among the signatories. The organizations rejected the suggestion.

“If policymakers force insurers to pay for losses that are not covered under existing insurance policies, the stability of the sector could be impacted,” said David Sampson, president of the American Property Casualty Insurance Association, in a statement.

To compensate, Florida governor Ron DeSantis activated the “Florida Small Business Emergency Bridge Loan Program" last week. It provides short-term, interest free loans to help businesses cover their losses during the COVID-19 pandemic, and has $50 million total to lend.

Businesses with two to 100 employees in Florida are eligible to apply between now and May 8.

Federally, the U.S. Small Business Administration is offering small businesses loans up to $2 million with 3.75 percent interest rates.

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