As businesses experience losses and claims related to COVID-19, it may be worth considering whether there is insurance coverage for such claims and losses. Some of the possible sources of coverage are described below.
Business Losses Due to Closures
Business losses due to clients’ closure of business premises resulting from contamination at or near the premises, including lost profits and cleanup costs, may be covered depending on the facts and policy language. Often property and business interruption policies require physical injury to property and exclude coverage for viral contamination but, depending on the facts, contamination may qualify as physical injury. Not all policies exclude viral contamination. Also, in some cases these policies separately cover government mandated closures. Notice requirements under these policies may be very short.
Claims Against Management and Companies For Economic Losses
Claims against directors, officers, managers, members (Ds&Os) and associated entities related to disclosures to equity buyers and sellers as well as lenders in equity transactions are likely covered under “D&O” policies. Other kinds of misrepresentation claims related to COVID-19 may be covered under D&O policies but entities, as opposed to management, will be covered only if they have so-called “entity” coverage, that is, coverage for the entity’s wrongful acts not connected to equity transactions. Bodily injury claims are typically excluded. Emotional Distress claims may or may not be excluded. Bear in mind that the time to give notice under these policies can be very short, especially when the situation develops shortly before the policy renews. If concern exists about a particular disclosure’s accuracy, consider giving “notice of circumstance” which is a notice to the carrier that circumstances exist that may give rise to a future claim. This will secure coverage under the existing policy even if the claim comes in later and avoids concerns about whether notice of the ultimate claim is timely. There is only rarely a downside to giving “notice of circumstance.
Bodily Injury and Emotional Distress Claims by Non-Employee Third-Parties
Bodily injury claims, and in some situations pure emotional distress claims, both caused by employees (acting in their capacity as such) and exposure at business premises are typically covered under commercial general liability policies. Some policies, however, may exclude coverage for injuries arising from viral exposure.
Claims by employees that, for example, employment practices implicated in the COVID-19 outbreak are discriminatory may be covered under Employment Practices Liability (“EPLI”) policies. Violation of employee privacy rights may be covered under the same policies. The notice requirements under these policies are similar to D&O policies.
Event Cancelation Insurance
Major events often have coverage for cancelation or curtailment of the event. One policy we’ve reviewed, for example, would cover the sponsor’s return of participants’ entry fees due to cancelation or curtailment unless the cancelation or curtailment was for reasons such as the sponsor’s inability to proceed for financial reasons.