The effect of COVID-19 on the construction industry has likely only just begun. From site and plant closures, to sick and quarantined employees, to supply chain interruptions, to material price and foreign exchange related impacts – this crisis poses a forbidding suite of challenges to the sector.
A discussion of all these issues is well beyond the scope of this article and, at the time of writing, the exact nature and context of the issues that will arise can only be surmised. However, it seems clear there will be losses, and that construction participants will be wondering how to deal with contractual commitments and whether losses arising from those contracts will be recoverable.
Unfortunately, most property and casualty insurance policies are not likely to provide cover for pandemic losses. While most companies will have business interruption coverage of some form, these policies are typically meant to cover disasters such as fires and storms and will only in very unusual cases contain coverage for business interruption caused by a pandemic.
However, you should review your policies carefully. Insurance policies can include contractual language that may broaden coverage beyond what may have been originally anticipated. If you have any questions about whether your policy might provide coverage for the specific losses you are experiencing, speak to your broker or lawyer.
Shutdowns and many performance-related issues caused by the pandemic may constitute frustration of a construction contract. Frustration of a contract occurs when a party is prevented from performing its contractual obligations by an event outside its control.
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