Insurance Coverage for COVID-19 Related Losses
For businesses and business owners, the current coronavirus (COVID-19) pandemic presents many risks. Some risks, such as the risk of business interruption and associated loss of revenue, are obvious. Others, like what happens when an employee gets COVID-19 on the job or what happens if a business is accused of exposing multiple individuals to COVID-19 through negligent safety practices, may be less clear. Now, more than ever, it is important for businesses of every size and variety to understand the situations in which their existing insurance may provide coverage for COVID-19 related losses so they may act diligently to preserve any coverage that may exist. This blog post provides a general overview of some types of commercial insurance coverage that may cover COVID-19 related losses and should not be viewed as legal advice.
Policy Language is Key
At the outset, it is important to understand that insurance coverage is dictated by the language of the insurance policy in question. This is particularly true in the commercial coverage context where carriers are more likely to use manuscripted (i.e., non-standard) policy forms and endorsements vary by policy. While there are certain broad types of commercial insurance coverage that are more likely to be triggered by COVID-19 related claims or losses, each individual policy must be reviewed to determine whether coverage exists.
Civil Authority and Business Interruption Coverage
Currently, the most prevalent impact of COVID-19 for businesses is closure resulting in loss of income. This is particularly true given the shelter-in-place orders being issued by many states and municipalities.
Commercial property insurance policies often include “civil authority coverage,” which is designed to cover loss resulting from an order by a civil authority preventing access to the insured’s premises. In general, for a business to recover lost income under civil authority coverage, the lost income must be caused by a civil authority action prohibiting access to an insured’s premises, and the civil authority action prohibiting access must be due to the direct physical loss of or damage to property other than the insured’s premises. We anticipate COVID-19 related civil authority coverage claims will depend, in part, on: (a) whether a COVID-19 restriction closed, or merely hindered access to the insured’s premises; and, (b) whether the harm the COVID-19 restrictions are designed to prevent constitutes direct physical loss or property damage. Businesses should have their policies evaluated as soon as possible to determine whether they may qualify under a civil authority coverage provision, as there are specific timeframes in which notice must be provided to insurance carriers.
In addition to civil authority coverage provisions, many commercial property policies also include business interruption coverage, which generally covers things like lost income from a suspension of business resulting from a covered peril. Many such provisions require physical damage to the insured’s property in order to trigger coverage for lost income during the subsequent business interruption. Nonetheless, business interruption coverage can and should be evaluated alongside civil authority coverage to determine whether coverage exists for COVID-19 related losses under a business’s property insurance policy.
Workers’ Compensation or Employer’s Liability Coverage
COVID-19 related claims may also trigger a business’s workers’ compensation or employer’s liability coverage. Employees who are exposed to COVID-19 solely by virtue of the specific requirements of their job—i.e., healthcare workers whose job puts them in direct contact with patients, construction workers who must enter a customer’s house to provide a service, etc.—may attempt to seek workers’ compensation benefits resulting from their exposure. Similarly, work-related exposure not covered by workers’ compensation may trigger coverage under a business’s employer’s liability coverage. Employer’s liability may be triggered if persons other than the infected employee, such as the employee’s subsequently infected family member, allege that the employer breached a legal duty of care to protect the employee from infection.
Commercial General Liability Coverage
Notwithstanding a variety of state and municipality stay-at-home orders, there are a number of essential businesses still operating that carry with them an inherent COVID-19 transmission risk. For example, a COVID-19 infected employee working in a restaurant kitchen could infect tens or hundreds of customers by contaminating to-go meals. An infected in-home repair technician likewise presents a transmission risk to the customers in whose homes he or she works. Claims brought by customers against a business for bodily injury caused by such COVID-19 transmission(s) may be covered by the business’s commercial general liability coverage.
Unpreserved Claims can be Lost
An insurer’s obligation to provide insurance coverage is not triggered until the insurer is provided with notice of a potential claim. If notice is not timely provided, coverage may be lost or forfeited. Notice requirements and time frames differ depending on the type of policy at issue (claims-made or occurrence-based) and are usually premised upon the date the insured first becomes aware of the existence of an actual or potential claim. Businesses who think they may have a potential claim (COVID-19 related or otherwise) should act swiftly to report the claim as and when such reporting is required under their insurance policy.
Insurance coverage can be lost if businesses do not act promptly to pursue and preserve coverage once they are on notice of a potential claim. If you or your business is facing a COVID-19 related claim or loss, contact a qualified insurance coverage attorney to assist you in evaluating all available insurance coverages and, if coverage may be available, to assist with timely submitting a claim to preserve coverage for your loss. A coverage evaluation and claim submission assistance is relatively inexpensive and, if coverage is found to exist, it is an investment that will generate significant returns.
Davis & Ceriani’s Insurance Coverage Team
Scott W. Wilkinson, Partner
Michael P. Murray, Associate