The evolution of COVID-19 has led to more complex questions than answers, and every day brings new developments on how to handle related losses. With the mandated closures of many commercial properties, landlords are facing business interruption and loss of rents. When it comes to insurance coverage, there are many important considerations to be aware of, such as coverage triggers/perils and other factors to consider before filing a claim.
With the steady rise in claims, coverages for risks related to the coronavirus are cautiously and thoroughly being analyzed on the basis and extent of the policy language. However, carriers are increasingly adding broad exclusions for COVID-19 to their policies. Nonetheless, policyholders should report claims relating to the coronavirus to their carriers immediately, given the rapid changes in the pandemic and responses to it.
Many factors are involved in coverage analysis discussions, including the type of loss, the type of coverage and the terms and conditions of specific policies. Every case is being treated on its own merit, and coverage decisions ultimately lie with the carrier. Alternatively, businesses may be able to pursue government relief programs. Here are items to consider from a select group of policies:
Workers’ Compensation
Workers’ Compensation (WC) coverage is specifically aligned with state and jurisdictional guidelines. Was the disease contracted during the course of employment, and/or due to conditions peculiar to the work? Employers need to address their respective state WC laws. Claims arising from employees going to work are to be documented and reported to your carrier immediately for their review.
WC laws will not address COVID-19 directly unless a state has taken specific steps to address coverage for employees unable to work due to the virus. In general, state laws do not address the question of employees exposed due to the nature of their employment and/or traveling overseas. Each state will have their own response to the crisis.
Business Interruption/Property
Business interruption (BI) coverage historically requires a degree of damage to the insured’s property. At this time, the carriers have not recognized that contamination constitutes damage to covered property. Thus, supply chain and similar losses are unlikely to be covered. Federal programs are under consideration and may provide relief once a state has been declared a disaster area. This could include the availability of small business loans.
Steps taken to continue in business despite the lack of supplies should be recorded for submissions to the carrier or government agency. This includes additional costs of using substitute suppliers or changing operations to stay in business, including modifications in process or materials used or change in business plan. Documentation is paramount.
Liability Claims
Third-party liability claims for bodily injury are being filed against policyholders for failure to mitigate or warn others of risk of contamination. These claims should also be submitted to the carrier, even though many general liability policies have an exclusion for bacteria, viruses or the coronavirus.
Shareholders may sue corporate officers for economic loss resulting from inadequate response to coronavirus. Most directors’ and officers’ (D&O) policies exclude bodily injury and may also exclude virus-related claims. Check these policies for pollution, bacteria or virus exclusions.
Cyber Concerns
Individuals are strongly urged to be extra cautious when opening emails, as phishing scams may develop. There is a need to be vigilant as cyber criminals prey on opportunities and general public fear.
Speak to your insurance broker about your coverage and policy exclusions to minimize the potential negative impact of COVID-19 on your business. Visit our website to access our virtual summit recordings to get practical guidance and perspectives on how to move forward in the midst of uncertainty.
Frank DeLucia
HUB International Northeast
frank.delucia@hubinternational.com
212-338-2395
