While the world steps through the global pandemic, we know our clients are facing the same questions, concerns, and decisions that we are grappling with. The collective safety of our employees, families, clients, and your business interests weigh heavily on everyone’s mind. Disaster planning can only take you so far when experiencing anything of this magnitude.
How does insurance play into the events unfolding? Insurance policies address coverage in general terms. The specific circumstances around each loss or situation will determine whether or not coverage applies. However, in general terms, we’d like to share an overview of the potential claims issues in various lines of coverage and how those policies might respond.
Property
Coverage under a property policy is triggered by “physical damage” from a covered cause of loss. Whether it is the building, personal property, or business income loss, physical damage is the required trigger. Even the extensions that allow for coverage if your property is inaccessible from a loss suffered by others require there to be physical damage to that property from a cause covered under your policy. There is not likely to be coverage for losses resulting from slowdowns, closures, or economic turmoil. Besides, many policies may contain specific virus exclusions that would operate to expressly exclude losses arising from COVID-19.
There are policies currently being made available to provide some level of business income. Most have minimum premiums in the range of $250,000 and are not a practical option for many businesses.
Parametric Insurance, which is triggered by defined events, can be explored for pandemic exposure, but only the largest organizations would have this available to them.
Again, every claim is unique, and coverage will be determined based on the circumstances presented. We will also continue to monitor responses relative to insurance issues from our Federal, State, and Local governments. As we have seen in the past and even on the health insurance front in this current crisis, our government leaders have changed and enacted legislation that can impact how the insurance industry responds to claims in these types of catastrophic events.
General Liability
You may face claims alleging negligence on your part, not in causing a Covid-19 illness, but in failure to prevent it. Absent a specific additional exclusion which might be present considering your business operations; the general liability policy does not exclude communicable disease. It does, however, contain a pollution exclusion. Often in the past, insurers have looked to this exclusion to deny claims from viruses, bacteria, and communicable diseases. This may be a state jurisdictional issue for our clients.
An additional issue that might also be state-related is the definition of occurrence and whether this event is an occurrence as defined in the policy. An occurrence is usually defined as an accident, including continuous or repeated exposure to the same harmful conditions.
With the fear of sounding repetitious, the individual circumstances will drive the response to any claim presented.
Workers’ Compensation
We are concerned that many carriers will take the position that exposure was not work-related and deny the compensability of claims for Covid-19, leaving the burden of proof to the employee. Obviously, workers in the healthcare area will be exposed. But many others may have their initial exposure to the virus occurring in the workplace. Your first case may not take place in the workplace, but subsequent exposure can result. We are prepared to help our clients and their employees navigate the system.
It will be necessary for clients to notify us immediately upon initial awareness of a positive test to preserve defenses.
Environmental
Most environmental policies do contain communicable disease exclusion. Covid-19 is not the insurance industry’s first rodeo with the disease. Again, the specific situation may trigger other policy sections only to be determined by the actual claim.
Management Liability
Whether it’s your directors and officers, employment practices, or fiduciary policies, Covid-19 certainly creates additional risk for your owners, officers, and businesses. Losses can be expected. They may come about because of alleged discrimination in the handling of employment issues or a decrease in the value of employee ERISA plans.
A D&O claim might be triggered because the company did not adequately plan for the resulting economic conditions.
These issues are always very complicated. These policies do not cover the actual bodily injury or disease. Coverage may be triggered for your failure to plan or your economic loss resulting thereof. Standing back and reviewing the issues, in general, there are not specific exclusions in most policies for a pandemic or communicable disease-related claims.
To conclude, we know the next couple of weeks will be challenging for everyone.
We will be here. Our company will be fully operational regardless of what path Covid-19 takes. Our entire staff has work from home capability, and we have your back.
