“Is It Covered?” – Answers to Coronavirus & Business Insurance
According to the World Health Organization (WHO), over 101,828 cases of COVID-19 or coronavirus have been reported as of March 7, 2020. With this pandemic staring the US in the face, it’s only natural for executives to consider how it might impact business operations throughout the rest of 2020—and beyond. In this post, we’ll review how specific insurance policies might respond to coronavirus-related claims and how you can prepare your company for this unique risk.
COVID-19 is a type of respiratory illness, spread from person to person, that was first reported in China on December 31, 2019. By January 30, 2020, the outbreak was declared a Public Health Emergency of International Concern. Since then, thousands of people have prepared strategically to respond to the pandemic by stocking up, remaining homebound, and even making DIY hand sanitizer.
Although COVID-19 has impacted Asia the most with 80K of the over 100K reported cases in China, there are 92 countries or territories with reported cases currently. Sadly, the death toll sits at 3,482 early in the morning on the 7th of March, 2020—but continues to climb continually.
With 213 cases in the US, according to WHO, Americans are becoming more hypervigilant by the hour. US companies are second-guessing their involvement in China’s economy. For example, Levi Strauss & Co. is pulling up several stakes in China, taking a near-term hit along the way. But they’re not alone. Apple, Microsoft, United Airlines Holdings, and Royal Caribbean Cruises are a few others that are being forced to shift their business operations overseas.
Amid the pulling up stakes and homemade hand sanitizer, a vital question remains: How will this outbreak impact your business? And better yet, how will your insurance policy respond to coronavirus-related claims? Let’s review a handful of popular commercial insurance policies.
Although researchers are frantically working to develop vaccinations and therapeutics for COVID-19, no known cure exists yet. Naturally, China-based companies have taken the most significant hit from the disease. After all, China is considered a high-risk area, so employees in that region are becoming infected at a rapid pace.
To prepare your company for such an uptick in employee call-offs, sick days, or time off, would be a nightmare. Not to mention how a mass exodus from work directly to a physician’s office might force executives to consider the companies financial part in medical coverage for infected individuals. However, it’s vital to consider the role of a workers’ compensation insurance policy.
Typically, for a workers’ compensation policy to cover a claim, the loss must arise out of the course of employment. When it comes to COVID-19, it could be challenging to come to this conclusion.
For example, did the employee travel to a high-risk area because of work? Was the employee expected to work directly with others who had recently visited a high-risk area overseas? Or, is the situation so severe that merely leaving the house puts the employee at high risk of contracting the disease? Was there an option to work remotely? Is the place of business (or the region) under quarantine?
Questions such as these might seem like overkill right now, but they may roll off the tongue in Q4 or even into next year. Plus, we’re here to cover those details with you so you are confident in your policy. That said, a workers’ compensation policy will more likely respond to lost-time and medical claims for employees working in situations that leave them more exposed to the disease.
For US-based companies that employ workers or do business with organizations outside of the US, it’s essential to know specific state laws as they relate to these professional relationships. Keep in mind that government agencies manage social security programs, covering work-related incidents for employees who are based outside of the US—but regulations are country-specific.
With the global economy facing potential upheavals from COVID-19, some companies could be forced to lay off employees. These actions will likely trigger employee practices liability insurance (EPLI) claims, especially knowing the commonality of these cases already.
Former employees might quickly jump to conclusions, such as wrongful termination or discrimination, resulting in EPLI litigation. Defending against allegations of this nature could be incredibly costly—even if there’s no legitimate cause found. An EPLI policy would work to cover defense costs and help your company navigate the jittery economy.
Executive VP of RT ProExec, Kevin LaCroix, said it best, “There is no doubt that if a building fire, a plane crash, or an oil spill can result in D&O claims, the impacts on any given company arising from a global pandemic might at least as a theoretical matter also result in a D&O claim.”
That said, the coronavirus is spreading so rapidly that many companies are having a challenging time assessing what future impact the outbreak will have on business operations. As a result, directors and officers are left exposed in the wake of the pandemic, making D&O coverage even more vital for business longevity.
Furthermore, the financial market is facing numerous vulnerabilities directly related to COVID-19. This shakiness could mean that the impact disclosures have on company share prices could be more than expected. Again, this leaves directors and officers open to massive finger-pointing, per se.
In short, the outbreak has created fertile ground for D&O litigation, such as mismanagement and disclosure-related claims—which could result in business tort-related claims, too. If you question the strength of your D&O, please reach out to us, and we’ll review the details with you.
A general liability (GL) policy—and subsequently, litigation—might play out if customers can verifiably link their illnesses directly with employee illnesses. Consider entities such as schools, medical facilities, eateries, airlines, grocery stores, cruise lines, etc. Staff members who’ve contracted COVID-19 could pass the virus on to customers through sputum, which is how this particular illness spreads.
Aside from direct exposure, companies that are manufacturing antiviral drugs could also face product liability litigation. Claims arising from this type of risk, however, might seem more apparent than attempting to trace back the roots of the virus in an individual’s life. Either way, a GL policy might be called upon, so let us know if you’d like to review your overall insurance game plan.
As imagined, workers’ compensation insurance doesn’t protect employers from contract employees or customer lawsuits. Having a clear cut pandemic policy helps to shield companies from illness-related litigation issues. What’s more, pegging a cause in these suits is tricky, too.
Keep in mind; also, coverage varies depending on whether a company is solely US-based or faces specific risks outside of the US. In both cases, a GL policy will need to reflect a company’s unique needs.
When it comes to triggering property insurance, physical loss or damage from a covered risk must occur. However, COVID-19 wouldn’t necessarily add up to physical damage—even when customers buy less from a business. Without physical loss or damage, a property insurance policy doesn’t have any cause to respond.
Sometimes, government authority restricts travel because of a health threat, such as COVID-19. This hurdle might also prevent customers from frequenting a particular business. Or, employees might face loss of income because of the inability to travel or merely choose not to embark on an overseas journey. Still, these situations don’t typically trigger a property insurance policy.
However, it’s not uncommon for sub-limited coverage for income loss to be included in some property insurance policies. This type of coverage often stipulates that any loss of income related to murder, suicide, or illness must occur at or near the covered location. Although these are relatively grim provisions, industries that opt for sub-limited coverage are retail, entertainment, and hospitality.
Remember, though, specific coverage typically boils down to the wording of each policy. For example, the sub-limits mentioned before often provide companies a more affordable business interruption coverage.
Much like property insurance, however, business interruption insurance only responds when physical damage harms a customer or supplier’s property, resulting in a loss for the insured. However, COVID-19 wouldn’t count as physical damage. In other words, the disease-related damage wouldn’t trigger any policy whatsoever.
As the global economy trudges through the coronavirus threat, the end of the pandemic isn’t in sight yet. The right insurance policy could help your business navigate the incurred damages as you’ll likely renew your policy before COVID-19 is old news.
Plus, the needs for your business have likely changed significantly in 2020, and they’ll continue to evolve as the world sorts through this health and economic threat.
That said, modern business concerns, such as cybersecurity, are still paramount. Not even a pandemic can motivate a parlay with cybercriminals. To protect your financial assets as well as your employees, it’s imperative to have a robust insurance plan on your side.
As mentioned, it’s best to scrutinize the wording in your insurance policy to ensure the right coverage. Working with knowledgeable and seasoned insurance professionals can help you safeguard your business no matter the temperature of the global economy.
Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.
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