Property and liability insurers are preparing for claims across every type of insurance due to the outbreak of the novel coronavirus. As large-scale events close and businesses face supply chain stop, companies are losing money by the boat load.
Cancellations of Events
Events across the country are closing due to the voluntary decisions by corporations and now by explicit direction from local, state and federal government. In the past two weeks the NBA, NHL and MLB all suspended their seasons, the NCAA cancelled its March Madness basketball tournament, and Disneyland shuttered its doors indefinitely. All gatherings of 10 or more people have been decreed in violation of CDC requirements and many states have already adopted such social distancing policies. The Governors of California and New York just issued an executive orders closing all businesses and requiring all citizens of the state to stay at home.
Attorneys have been inundated with questions from insurers and corporate event organizers regarding coverage under event cancellation policies. These polices usually cover certain expenses and the question is now, how much and which ones.
The good news is that coverage for coronavirus-related cancellations may be available. However, the covered losses much include communicable diseases and some insurers are taking the position it it is excluded unless the policy specifically references pandemics. However, coverage could be denied if an organizer cancels because of the concern of the Corona Virus as opposed to actual contamination within the structure containing the event.
Should an organizer cancels an event due to an official ban on large public gatherings, such as those recently announced by New York and California, they are more likely to be eligible for coverage. However, a policy holder is obligated to mitigate its damages. This means a defense by an insurer is that the event organizer made no good faith effort to reschedule the event. In that case, the insurer may have a defense.
Interruption of Business
The arguments being made by the insurers is that in order to be entitled to business interruption insurance, the insured must demonstrate direct physical loss to a property. The argument is that the policy only covers economic losses if there first is property damage. So, a shutdown of a building because of the “fear” of the virus is arguably not covered.
If, however, one can demonstrate that an infected person was inside the property and physically contaminated it, that may be enough to meet the direct physical loss requirement.
Even if the initial threshold for a direct physical loss is met, though, the policyholder could run into other problems depending on the wording of their policy. Some commercial property policies with business interruption coverage contain exclusions for property damage arising from pathogens, bacteria, viruses and other disease-causing agents.
‘Those may very well come into play in a scenario in which an infected person has been inside of a property, if that could somehow otherwise trigger coverage,’ Foggan said.
Workers’ Compensation
Workers’ compensation insurers will soon face an influx of claims from workers who have contracted COVID-19 while on the job. The success of these workers’ comp claims will depend on whether the employees’ exposure to the virus was sufficiently tied to their work. That test is known as ‘work relatedness.’
The case of first responders is more readily shown work related illness. But for other workers, even those who have direct contact, such as in retail, it may be more difficult for them to prove they became ill from work.
General Liability
General Liability insurance carriers will likely be covering claims that their insured were negligent in protecting their customers from the virus. Such a law suit has already been field against a cruise line in south Florida. The claim alleges the cruise line allowed infected passengers to board the ship thereby infecting the plaintiffs. “Coverage A’ of standard general liability cover claims of negligence resulting in bodily.
The note to all businesses here is to require your employees to follow the CDC guidelines for the Covid-19 virus. Having written procedures in place that are also signed by each employee will reduce the risk of suits against the business. More importantly, it may prevent your insurer from denying you coverage if you are sued.
