Another common provision of coverage found in property policies relates to damages incurred as a result of actions by a “Civil Authority” (i.e. federal, state, or local governmental entity). Typically, this scope of coverage requires proof from the policyholder that the loss of business income is linked to:
(1) An action of civil authority;
(2) That prohibits access to the described premise of the insured;
(3) That the prohibition of access is caused by a direct physical loss of or damage to property other than the described premises; and
(4) That the loss through the other property is caused by or results from a covered cause of loss as set forth in the policy.
While this coverage is not focused upon direct physical loss to the insured property, it generally does require proof of direct physical loss to property within a geographic distance of the insured property. It likewise requires that the direct physical loss to that property be caused by a covered loss. Hence, the same arguments that would apply to a business interruption claim could come into play with any potential claim under a policy’s civil authority coverage (i.e. does the existence of the Coronavirus on property outside the insured premises constitute a “direct physical loss” to that property). Claims for civil authority losses will also be subject to the argument that the act of civil authority did not completely prohibit access to the business. Lastly, this coverage may be subject to the same exclusions outlined in the business interruption section.