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Written By: Jimmy Norton, CPCU
COVID-19 has arrived here in the US, and people are wondering how it will affect them. At this point, the CDC says that "the immediate risk of being exposed to the virus that causes COVID-19 is thought to be low." However, public reaction to the threat of a pandemic can negatively affect your business. Several of my clients are asking how their business insurance will protect them.
The spread of Coronavirus is a developing situation, so things may change quickly. Please monitor the CDC website closely for updates.
I've been studying insurance industry articles on how different policies may respond to Coronavirus-related claims. Naturally, coverage for any claim depends upon the specific circumstances. Please don't interpret this article as proof positive of any insurance protection. These are just my thoughts as I study this topic.
LOSS OF REVENUE
Fear of infection may keep people at home. If people aren't going out to meet, eat, shop and exercise, then revenue will decrease. The insurance industry treats this as a business risk and cannot provide coverage against this financial loss. Insurance policies require that there be some physical damage or Government mandate to trigger coverage.
Business Interruption insurance covers loss of net income and continuing operating expenses if your business cannot operate after a loss. This coverage requires that there be a direct, physical loss at your premises - or at the premises of a business on which your company revenue depends. The presence of an infectious disease may not be considered direct, physical damage and therefore not trigger the Business Interruption coverage.
Moreover, many Property policies contain exclusions for viruses and bacteria, so these will prevent coverage for most Coronavirus-related Interruption claims.
A company may not suffer a direct physical loss, but its income can be affected if public access is restricted due to the mandate of a Civil Authority. There is an insurance coverage that applies to this - aptly named "Business Income due to Civil Authority." It requires that access to your premises be specifically prohibited by order of a civil authority "as the direct result of a Covered Cause of Loss to property in the immediate area" of your premises. If the Government states that people cannot go to certain establishments or areas, then it's possible that this coverage could apply. Again, the Coronavirus infection trigger would have to meet your policy definition of "covered cause of loss." If your policy has a virus exclusion, then it may apply here, too.
What if my employees get Coronavirus while at work? State Work Comp Commissions may have to decide the answer to this question. If an employee files a Work Comp claim for Coronavirus, they would need to show that illness "arose out of and was in the course and scope of the employment" and "caused by conditions peculiar" to the work. In a public health situation, it might be difficult to prove that the employee's exposure to Covid-19 was peculiar to their employment for your company - unless you are in a healthcare-related industry. In the event of such a claim, your Work Comp carrier would investigate and either grant benefits or issue a denial based on the Work Comp laws of your state.
Here is a great article about this topic if you'd like to read a little more about it.
How could your company be sued as a result of a Coronavirus infection? Would General Liability provide coverage if someone alleges that they were infected at my business? Such a claim might be difficult to prove due to the very public nature of this virus. However, people have sued for worse reasons. General Liability policies respond to bodily injury or illness claims. Many GL policies contain an exclusion for communicable diseases that would prevent coverage for such a claim. Check your policy or ask your Agent if yours includes such an exclusion.
Fear of the disease may bring claims of discrimination or harassment by individuals who were denied services from your business. Employees with a cough may be ostracized or sent home out of fear of infecting the rest of the office. Asian-Americans have been victimized by racist and discriminatory attacks.
Allegations of discrimination and harassment are covered under an Employment Practices Liability policy. We have a blog post on this coverage. Click here for further reading.
Beware of emails purporting to be from the World Health Organization (WHO) or other agencies asking for sensitive information or directing you to websites with important virus information. These emails may contain attachments or links for "important updates." Hackers are taking advantage of public concern over Coronavirus. The links and attachments may release ransomware onto your computer.
The WHO issued a warning about this on their website.
Their warning states:
The World Health Organization will:
Beware that criminals use email, websites, phone calls, text messages, and even fax messages for their scams.
You can verify if communication is legit by contacting WHO directly.
Report a scam
A Cyber Liability policy that includes coverage for Cyber Extortion will respond to claims from a ransomware attack. Check your policy or ask your Agent about including the coverage in your policy.
MAKE PLANS NOW, DON'T RELY ON INSURANCE
The best way to prevent or minimize a loss is to plan ahead. As you've seen in my comments above, you may not be able to rely on an insurance policy to repay you for a Coronavirus-related loss. Risk Management will be your best defense. The CDC has a web page that provides guidance for businesses and employers to plan and respond to this disease. This is a good place to start.
If you send your employees on travel, be sure to check the CDC's Travelers' Health page first.
We'll be sure to update you as we learn more about this issue. If you have any questions, please contact us here at Brock-Norton Insurance.