NEW YORK—Some hotels have been battling a surge of bedbugs for several years now, but the bloodsuckers have made their way into retail stores and caused companies to consider their insurance coverage options.

Some insurance experts say coverage against bedbug infestation could be “problematic,” but lawyers aren't too quick to write off the possibility that a standard property damage policy could provide some coverage.

Business interruption, third-party liability claims and reputation risks also are areas that retailers and hoteliers need to consider as they deal with the increasing nuisance.

New York has been the focus of the bedbug issue, with a recent survey revealing that one of every 15 New Yorkers have dealt with an infestation. In New York, bedbugs have cropped up in various places including hotels, theaters, high-end retail stores and the public library.

“They are becoming a more widespread concern as the number of infestations increases,” said Mac D. Nadel, Norwalk, Conn.-based U.S. practice leader for Marsh Inc.'s retail and wholesale food and beverage practice group. “The latest reports have put some focus on retailers, which shows it's not only just a hospitality business problem, but a property, real estate and general problem.”

Media reports in July said the Bed Bath & Beyond Inc.-owned chain Buy Buy Baby Inc. in Manhattan was infested with bedbugs. However, Farmingdale, N.Y.-based Bed Bath & Beyond said the situation didn't necessitate a store closure.

After two independent services inspections of the entire store—including the sales floor, stock rooms, shipping areas and offices—four of the pests were found on two display chairs, which immediately were sealed in plastic and removed from the building, Bed Bath & Beyond said in a statement. Further inspections have found no further evidence of bedbugs, the company said.

Mayor Michael Bloomberg's administration reportedly fielded 11,000 complaints about the pests in 2009 compared with just 537 in 2004. As a result, $500,000 has been committed to deal with the infestation.

However, reports have sprung up in Ohio and Los Angeles as well. Bedbugs—which are not known to spread disease but bite and leave itchy red welts—are more of a nuisance than anything else, but the problem they create is being taken seriously.

More importantly, it's no longer just a hospitality industry problem and the battle against bedbugs is expected to continue.

“You really have to take the blinders off on this issue because they're starting to get into places that are not normally exposed to bedbugs,” said Tracy Knippenburg Gillis, New York-based crisis management practice leader for Marsh Risk Consulting. “It makes it more important for retailers, hotels and other commercial businesses to have a process in place to mitigate the spread and to prevent further occurrences.”

Most standard commercial property policies either have specific vermin exclusions for “infestation” or “loss due to insects” or have other broad “contamination” exclusions, insurance brokers and insurers said, adding that the policyholder has to prove actual damage of items that were infested if exclusions aren't present in the policy.

David Kroeger, Chicago-based attorney within Jenner & Block L.L.P.'s insurance and reinsurance group, said policyholders should look closely at what the vermin exclusion says and how it categorizes and defines vermin.

“I wouldn't give up on the property policy immediately,” Mr. Kroeger said. “Vermin exclusions may not focus on bedbugs, but may focus on insects like termites.”

This is important, Mr. Kroeger said, because if a store or hotel is forced to shut down due to bedbug infestation and cannot reopen until after fumigation, business interruption coverage could be triggered.

For hotels, loss-of-attraction coverage could be applied for actual losses sustained due to cancellations or the inability to accept bookings for rooms due to murder and suicide, and also may apply to vermin, said Nancy Green, Chicago-based executive vp at Aon Risk Solutions, a division of Aon Corp.

She also said that type of coverage is an extension of a typical property policy and can provide some relief, typically up to $1 million or higher, depending on the limits purchased.

Hotels and retailers also need to be aware of the potential of third-party liability, though most retention levels on a property policy will be higher than the amount of claims costs, she said.

“Any time you are a guest in a hotel and you have sustained bodily injury or damage to your property as a result of that stay, you have the right to make a claim,” Ms. Green said. “Bedbug incidents are no different.

“However, it is often difficult to prove the source of infestation, as it is easy for a traveler to unknowingly transport bugs due to exposure which may have occurred prior to arriving at the hotel. Hotels are just as interested as guests are to quickly respond to and resolve bedbug incidents,” she said.