COVID-19 continues to have an unprecedented effect on business operations throughout the world. While the availability of insurance coverage for pandemic-related losses is still far from certain, it is imperative that business leaders review their insurance policies and give notice of any potential claims as soon as possible. Below are answers to questions every business should be asking now.
What should I do if (I think) I have a claim?
Report it to your insurer. Timely reporting is critical to preserving your rights under your policies. We encourage you to report any claims directly to your insurer(s) as soon as practicable and in accordance with your policy terms.
Where do I find my claims reporting information?
This information is in your insurance policy, typically in the Declarations section (the first few pages).
Are there endorsements or exclusions I should be aware of in my policies?
We encourage all insureds to review their policies. Terms to look for include, but are not limited to: virus, disease, infectious/communicable disease, bacteria, fungi, mold, contamination/contaminated and pandemic.
Are there other provisions in my policies that I should focus on?
Insureds should also closely review the declarations page of the policy. Focus on the amount of potential coverage, any deductible or self-insured retentions that must be satisfied before the policy can respond to a loss, and the term of the policy. Claims made policies often will prohibit coverage for claims that the carrier has not given notice of prior to the expiration of the policy period. In addition, if your policies expire soon, you should seek help from your broker and/or experienced insurance agent in negotiating any renewal terms, particularly those related to the exclusions noted above.
If your business is facing the potential for third-party claims, you should also closely review the provisions of the policies relating to defense costs and choice of counsel. Do not assume that your defense expenses will be paid in addition to the limits of liability in the declarations. Many policies are “burning limits”—meaning that costs of defense will erode the available limits. In addition, many policies require that insureds use pre-approved counsel chosen by the carrier to defend third-party claims.
I have seen articles or other postings suggesting there could be coverage for COVID-19, are they wrong?
There is much speculation about the potential outcomes of COVID-19-related claims, and many respected sources (i.e., law firms, brokers, industry experts) have commented on the issue. These opinions provide general guidance about potential insurance coverage and issues insureds may face. However, most acknowledge that coverage will ultimately depend on the specific facts of the claim, the policy language and applicable laws. The only way to know if an insurance carrier will pay out on a claim is to submit it.
Should I submit a claim?
Coverage for COVID-19 will depend on the specific facts of the claim, the policy language and applicable state laws. Moreover, actions taken by federal and state authorities in response to this pandemic are continuously changing and may impact insurance coverage. Timely reporting is critical to preserving your rights under your policies. We encourage you to report any claims directly to your insurer(s) as soon as practicable and in accordance with your policy terms.
You can find your claims reporting information in your policy.
Workers’ Compensation FAQs
Workers’ Compensation is the state-mandated insurance policy that covers claims from employee injuries, including medical expenses, death benefits, lost wages, rehabilitation and more.
If my employee has contracted COVID-19, will my workers’ compensation policy provide coverage?
Generally, workers’ compensation claims will be adjusted according to the specific facts of the claim, the policy language and applicable state law. In most cases, exposure and/or contraction of COVID-19 likely will not be an allowable, work-related condition. Under certain circumstances, claims from health care providers and first responders involving COVID-19 may be allowed. We encourage employers to carefully consider what is reasonable, prudent and necessary for their employees to carry out their duties and to follow recommended guidelines and orders from government authorities.
Commercial Property FAQs
Commercial Property insurance is designed to protect all property vital to the daily operation of the business, covering not only offices but also any other physical assets important to the company. Such policies may also respond to loss of income or business interruption that results from physical damage to property by a covered cause of loss.
Are there endorsements or exclusions in my property policy that specifically address COVID-19?
For insurance policies issued prior to the COVID-19 outbreak, there was not an endorsement or exclusion that specifically names COVID-19 because that strain of coronavirus was not known or classified. However, most Insurance Service Office (ISO) property insurance policy forms contain exclusions for losses arising out of virus or bacteria. How these exclusions may be tested as a result of COVID-19 claims remains to be seen.
In February 2020, ISO provided two endorsements addressing COVID-19, which provide business income or extra expense coverage for loss from civil authority orders related to coronavirus. (See link.) These endorsements mirror endorsements ISO made available in 2014 in response to the ebola crisis, basically replacing “ebola” with “coronavirus.” However, we are not currently aware of any insurers who have filed these forms for use in their policies.
Do I have Business Interruption/Business Income coverage for losses related to COVID-19?
In general, business interruption insurance protects against “direct physical loss” of or damage to insured property by a covered loss. If property damage has resulted in a loss of business, then you should consider filing a claim with your property insurer. For COVID-19 related claims, insurance carriers may dispute whether a “direct physical loss” has occurred. Some states have expanded the definition of “physical loss” to include contamination or other causes, which render something unfit for its intended use; others have not.
Does my property policy have coverage for contingent business interruption?
Contingent business interruption coverage or “contingent BI” is not part of the standard property policy form. If you do not see this coverage specified in your policy Declarations or on a specific endorsement, it is unlikely that such coverage exists. Contingent BI may be found in some policies, particularly those of larger companies with manuscript language. Typically, such coverage is subject to a large retention and a specific sub-limit of the overall policy limits.
While we cannot offer legal advice or opinion, you may want to consult your contracts and qualified legal counsel to see if there are clauses or terms that may help mitigate loss or allow your company to recover from lost business.
I’ve heard mention of “Civil Authority” in regards to Property and Business Interruption/Income coverage—what does this mean?
Civil authority coverage typically applies when, as a result of a covered peril, a civil order prohibits access to your business. Some policies may tie coverage back to a “direct physical loss,” but others may not. Similarly, some policies require that access be prohibited while others require only that it be impaired. The specific policy language and the extent of any civil order will need to be analyzed carefully to determine coverage. Typically, such coverage is subject to a deductible and a specific sub-limit of the overall policy limits.
For those with overseas operations, another avenue to explore is whether your policy has “political risk” coverage, which may cover actions taken by foreign governments.
Can I make a Business Interruption or Business Income claim if I’m a start-up that’s pre-revenue?
Referring back to the general concept that most property policies require “direct damage” to property from a covered cause of loss that results in loss of income, pre-revenue companies may not have “revenue” or “income” loss that can be proven as the basis of the claim. How the policy defines damage will be key in determining coverage in such circumstances.
General Liability FAQ
General liability insurance protects your business against claims of property damage and bodily injury, covering legal costs, associated medical costs and potential indemnity to the injured party.
What do I do if someone claims to have suffered bodily injury, property damage or other COVID-19-related losses as a result of my business?
This is a very difficult question, made even more so by the unprecedented nature of the current state of events. Laws and regulations are not entirely clear, and currently, the insurance industry has not put forth guidance in this regard. If a claim is made related to the virus, it will be adjusted according to the specific facts of the claim, the policy language and applicable state law.
Most important is ensuring that any such claims, circumstances or allegations are reported to the insurer(s) in accordance with the policy terms. Particular attention needs to be made to those general liability policies which are “claims made” or “claims made and reported.” These policies have specific requirements for when and how a claim needs to be reported.
Directors & Officers Liability FAQ
Could a directors and officers (D&O) claim arise out of COVID-19?
D&O policies are designed to respond to claims of wrongful acts that result in financial loss. Generally, the breach of fiduciary duty as a director or officer is a wrongful act under most D&O policies. However, what constitutes a wrongful act in connection with COVID-19 is unclear at this time.
One potential area that could implicate D&O coverage would be allegations that the company’s directors and officers acted unreasonably in response to COVID-19. Some examples which could form the basis for potential D&O claims could be the failure: (1) to develop and implement adequate emergency response plans; (2) to observe CDC guidelines and recommendations; (3) to ignore shelter-in-place or other civil orders; or (4) to not properly disclose the financial implication of the pandemic on the business.
Even if coverage is triggered, D&O policies often contain bodily injury exclusions, which insurers could rely on to deny coverage. Similarly, certain misconduct, such as the willful violations of law, are typically excluded from coverage. If a claim is made related to the virus, it will be adjusted according to the specific facts of the claim, the policy language and applicable state law.
Most important is ensuring that any such claims, circumstances or allegations are reported to the insurer(s) in accordance with the policy terms. Particular attention needs to be made to those general liability policies, which are “claims made” or “claims made and reported.” These policies have specific requirements for when and how a claim needs to be reported.
Insurance Premium and Payment FAQs
I have bills from my insurer, and I’m concerned that I might not be able to pay on time. Do I have any options?
Direct Billed Invoices from Insurers
Typically, the invoices are mailed to the business address noted on the policy Declarations, or if you have enrolled in e-pay or paperless billing, they are emailed to a designated email account that you provided on enrollment or are automatically withdrawn via EFT or direct debit.
We recommend that you contact the billing department of the insurer(s) directly to describe your situation and discuss payment options. It is possible that the insurers can accommodate adjustments to your billing plan, but they also may require the payments to be made in accordance with the terms and conditions already in place. If changes cannot be accommodated, we recommend discussing options with your bank and other financing resources directly, as direct billed policies cannot be premium financed.
Just recently, insurance regulators in several states have mandated that insurers eliminate cancellation for non-payment or extend premium payment grace periods. Depending on your state, this may provide additional breathing space.
