WHAT YOU NEED TO KNOW RIGHT NOW! 

Coronavirus and COVID-19 implicate your organization’s insurance coverage profile in ways that are unprecedented both for policyholder / insureds and their insurers.  No one, including your insurers, knows how this ultimately will play out across the industry.  Being aware of all your options is the only way you can maximize your insurance recovery.  Here are the principal coverage areas that may be implicated by the novel coronavirus / COVID-19 pandemic.

Business Interruption:  This coverage typically is part of a commercial property insurance policy and is usually only triggered by “direct physical loss” to property.  But potential contamination that prevents you from using your property or a government shutdown may, in some jurisdictions and under certain policy forms, trigger coverage.  Also, clean-up costs may be covered by some property policies that include limited communicable/infections disease coverage, usually via a sub-limit.  Coverage is more likely if a government authority prohibits access to a location because there is the actual presence of the novel coronavirus.  However, if you deep clean your facility or office as a precaution, it will be difficult if not impossible to recover under a property policy.  However, unprecedented crisis situations can sometimes prompt courts to find coverage where they previously did not.  You may also have business interruption sub-limits available under your “all-risk” or pollution liability policies.  It is important to note that some business interruption coverage may contain exclusions for property damage arising from pathogens, bacteria, and viruses, such as the coronavirus.

Contingent Business Interruption:  This coverage is similar to business interruption but covers losses due to interruptions from upstream suppliers. The triggers for coverage are often the same as business interruption, focusing on physical damage to the supplier’s covered property.

Event Cancellation:  Event cancellation policies may provide coverage for both lost revenues and out-of-pocket expenses for coronavirus-related cancellations.  These policies are designed to respond to situations where it is legally or physically impossible to hold the event.  However, policies may have exceptions for infectious disease, such as COVID-19, or may not be triggered if the cancellation is merely due to fear of the presence of coronavirus.  Additionally, these policies might require an attempt to reschedule any such event before coverage is available.

Pollution:  Recovery may depend on whether coronavirus constitutes a pollution incident or event implicating the main sub-limits of the policy. This requires that policyholders closely scrutinize the policy Insuring Agreement.  Business interruption sub-limits may be available and can be relatively substantial.  Some pollution policies cover disinfection or deep cleaning of physical spaces subject to a relatively low sub-limit. Coverage may require that at least one person with suspected or confirmed COVID-19 to have visited the policyholder property. The policy analysis can quickly become technical with potential recovery unclear due to the unique characteristics of the claim and the lack of legal precedent.

General Liability:  Commercial general liability insurance may cover defense and indemnity costs incurred in connection with lawsuits alleging bodily injury due to COVID-19 diagnosis.  Also, in certain circumstances and in certain jurisdictions, general liability insurance may provide coverage for measures taken to prevent bodily injury.  However, commercial general liability policies may also have applicable exceptions related to exposure to a “pollutant” or “contaminant,” which could be read broad enough to include the coronavirus exposure.

Workers’ Compensation:  Workers’ compensation policies may be available to address claims by employees that allege they were exposed to the coronavirus at work.  In order for there to be coverage under a workers’ compensation policy, it must be determined that the loss to the employee arose from the course of employment and there needs to be “work relatedness,” which is difficult to establish in a virus situation.  For there to be coverage, the exposure must be sufficiently intertwined with the job.

Crisis Response:  Crisis response policies typically provide insurance coverage for enumerated specific types of “Insured Events.”  Covered Insured Events typically require malintent on the part of the individual or group causing the injury, loss or damage.  Thus, a crisis response policy is not likely applicable to losses related to COVID-19.  However, if your crisis response policy includes coverage for emergency repatriation there may be insurance for the relocation of insureds or employees.

What should you do right now?  Rather than waiting for a claim to arrive, you should proactively do the following:

• Carefully review your coverages. Give special attention to claims-made and notice periods.  Pollution policies, for example, can have very brief notice of circumstances periods (such as 14 days).
• Keep close track of your losses. Documentation of economic loss and preservation of all relevant records is best done in real-time.  Presume everything is covered even if unlikely.  Forensic recreation will be time-consuming and expensive, especially if you must retain accountants, lawyers or consultants.
• Mitigate your losses.  Insurance policies require that you try to limit your loss as much as possible, and it is best practice whether you ultimately have insurance or not.
• Provide Notice and/or Make Claim.  All insurance policies require prompt notice to the insurer once you become aware of the loss.  Review the policy and endorsements for unusually short or “gotcha” “notice of circumstance” time periods, especially for sub-limit coverages. Carefully determine when claims must be asserted.  This area is always fraught with risk and it is all-too-easy to miss deadlines in a crisis-like situation.

We welcome any questions you might have.  Call or email Steve Hoke 312-575-8576 shoke@hokellc.com or Laura Geiger lgeiger@hokellc.com.