TANGO Partners Perspective – May 2020
Are We Covered for COVID-19?
Augusto Russell, CIC
Partner with Insurance Provider Group
“Are we covered for business income loss?”
That is the main question we have been asked by our clients these past few weeks. In reviewing the policies and receiving declination letters from the insurance companies, the answer thus far has been ‘no’ primarily for two reasons: first, the Insuring Agreement under the Property Section of the policy requires “direct physical damage or loss” to trigger coverage; second, there is typically a “virus” exclusion added to the policy. Direct physical loss includes fire, vandalism, hurricane, and other tangible insured perils. The virus exclusion has been added to the policies going back to 2006 because of the SARS virus. However, we continue to give the following advice:
- Review your policies. We review our clients’ policies because not every policy is the same. We have found one insurance company providing a small sub-limit of coverage for loss due to “communicable disease.”
- Submit the claim for the record. Even though the claim is likely to be denied, we want the insurance company to make that determination and for the policyholder to comply with the Notice of Claim condition to report a claim after the loss “as soon as practicable.” Why? Should there ever be coverage found due to legislative mandate or successful legal challenge, the insurance company cannot deny for “late reporting.” We anticipate these legal challenges will take some time to play out.
- Caveat for reopening. There is some reluctance to reopen business operations for fear of COVID-19 related liability claims. What if you are sued because someone alleges getting COVID-19 from your establishment? Let us stress again the need to please review your policies. We have seen policies that have a virus exclusion under the General Liability section. Congress is contemplating giving businesses immunity to help restart our economy, but that has not passed as of this writing. The best action is to follow federal, state, CDC, OSHA, and other official guidelines to minimize your legal liability against such claims. The plaintiffs may have difficulty proving they specifically caught the virus at your facilities.
- Increased Cyber Liability. With more employees working remotely and not necessarily in as secured environments, be aware of the potential increase in cyber-attacks such as “phishing” and social engineering fraud. Be sure to educate your employees to be more vigilant.
- Request premium relief where possible. We have had success asking insurance companies to offer premium savings to our clients for idled vehicles and workers due to the pandemic. Consider this for your Commercial Auto, Workers’ Comp and General Liability policies. There may be other sources of premium relief in your specific insurance programs.
The impact of Covid-19 on insurance policies will continue to unfold. There will be other emerging items to consider. For example, you may have Claims Made policies such as Professional Liability and Management Liability (D&O). These policies require you to submit a claim during the policy period. What if, on renewal, the insurance companies exclude Covid-19 and you report a claim after the renewal? Will there be coverage? Workers’ Comp Basic Manual rules are being revised to reflect the application of payroll and Covid-19 related claims to furloughed employees. We at Insurance Provider Group are keeping track of these changes and emerging concerns. If you have any questions or wish to discuss Covid-19 and insurance issues, please feel free to contact us.