All of us who are trying to figure out how best to help our companies survive and perhaps even thrive in the coronavirus crisis should be sure to review and evaluate the insurance policies we carry to protect our companies from unexpected loss. While none of us fully understand the extent of what the current losses could be, a wise business owner looks to all possible ways of mitigating whatever losses do arrive.
The landscape of claims and coverage for COVID-19 losses is in its early stages. Insurers and insured alike are endeavoring to understand and interpret, in the most favorable way possible, existing coverages that were, for the most part, not crafted with this exact situation in mind. This is often how certain specific coverages and exclusions evolve, though that is little comfort to those who could use the coverage now.
Review Your Coverages
Any investigation of potential coverage must start with a close review of the language in each policy the business carries. The particular coverages that merit attention, depending of course upon the insured’s specific situation and upon the nature of losses suffered, are:
- Commercial Property/Business Interruption Insurance
- Directors’ and Officers’ Liability Insurance
- Commercial General Liability Insurance
- Cyber Liability Insurance
- Workers Compensation/Employers’ Liability Insurance
- Employment Practices Liability Insurance
- Event Cancellation Insurance
- Trade-Credit/Disruption Insurance
- Professional Liability Insurance
In addition to whether there is or could possibly be actual insurance coverage, issues of particular concern to policy holders are:
- Notice requirements for reporting/preserving a claim
- Other requirements/timing issues relating to proof of loss and limitations on filing suit
- Waiting periods
- Calculation/valuation of loss issues, how to prove damages
- Does the policy contain a requirement for physical damage or loss?
- Does contamination related to a pandemic constitute physical loss?
- What type/extent of loss is sufficient for coverage?
- Are there express exclusions for specific or non-specific contamination?
- Duty/ability to mitigate losses
- Impact of force majeure clauses
- 2020 renewal issues
Consider Additional Cyber Liability Coverage
If your business has recently begun or expanded remote working, we strongly recommend reviewing with your insurance broker whether you have adequate cyber liability coverage in place. There are a variety of types of cyber coverages on the market and policies vary widely.
First-party coverages can pay your business directly for loss or damage to electronic data, loss of income, extra expenses, cyber extortion, and notification costs in the event of a data breach and reputational damage.
Third-party coverages apply to claims against your business by individuals or companies that have been injured as a result of your actions or failure to act and sometimes cover fines levied on your business by regulatory authorities. Always review how the policy handles legal fees, settlement authority, and whether you can select your own counsel.
Are Communicable Diseases and Government Shut-Downs Covered?
Currently, there is legislative pressure, both local and federal, aimed at insurers to pay COVID-19 business interruption losses. Insurers have responded that these policies were not designed to provide coverage against communicable diseases such as COVID-19. This issue may only and ultimately be decided by the Courts, based upon strict interpretations of language policy by policy.
Preserve Your Claims
Still, it could make sense to pursue, or at least take the action necessary to preserve the right to pursue, a claim if existing policy coverage language is general and exclusions are non-existent, limited or vague. Each case is unique.
This is a continually evolving situation and we as a business are engaged in making this same evaluation that we recommend to you. We will continue to monitor new claims and coverage developments and share what we learn with you. Please contact Donna M. McMillan at firstname.lastname@example.org or Natasha M. Nazareth at email@example.com for all your real estate, business, and employment law needs.