Now is the time to have your company’s insurance coverage analyzed by experienced counsel to determine how it should respond to losses, damages and claims resulting from the COVID-19 crisis. Determining insurance coverage depends on the policy language, how courts may likely interpret the policies’ terms, conditions and exclusions under controlling state law, and the specific facts of your case. Engaging attorneys early in the process also gives your company the greatest ability to protect your communications and analyses under the attorney-client, work product and other applicable privileges and protections. Having experienced attorneys in your corner will allow your company to present its case in the best light and allow you to promptly confront any unfair claims settlement practices or bad-faith conduct of your insurers to ensure that they honor their policies and implied duty of good faith and fair dealing. And by working together, your company and coverage counsel can take steps to track and document your losses, damages and claims and to mitigate your losses.
Here is a three-step plan for maximizing your company’s financial protection through your insurance policies.
- Locate Complete Copies of All Current Policies. If your company doesn’t have complete copies of all its policies, ask your broker to forward them promptly.
- Identify Potentially Responsive Coverages and Policies. The breadth of insurance coverage issues arising out of the COVID-19 crisis may implicate a wide range of coverages. Below are general descriptions of several insurance coverages that may insure your company against COVID-19 losses, damages and claims.
- Business Interruption
Business interruption insurance is designed to protect your company from lost earnings in response to covered disasters that cause “direct physical loss or damage” to insured property that results in a suspension of your business operations. “All risks” policies provide the greatest opportunity for recovery of COVID-19 losses over other policies that cover only listed “covered causes of loss,” such as fire, lightning, windstorm and other specified perils. If the presence of COVID-19 makes your office or building uninhabitable, the law of most states would find that this coverage has been triggered. Again, coverage depends on the specific policy language.
- Extra Expense
Extra expense coverage pays for the cost of certain expenses incurred to keep your business operational following a covered disaster. Insurers know that by paying for these extra expenses, such as the cost to rent replacement space at another location to operate your business during the cleaning and restoration of property damages, the covered cost will, in the long run, mitigate the policyholder’s damages.
- Contingent Business Interruption
Contingent business interruption insurance is designed to protect your company from lost earnings resulting from a covered cause of loss to someone else’s property, such as a key supplier or distributor of your products.
- Civil Authority
Civil authority insurance is designed to protect your company from lost earnings when access to your place of business is prohibited by a civil authority, such as a governor’s order or an order of a local health, police or fire department. Civil authority coverage often requires direct physical loss or damage to property and an order that prohibits ingress or egress to your company’s property or to access within a certain distance to your company’s property, for example, within one mile from your company. The coverage also has time limits for when losses begin to accrue, for example, 72 hours from the order, and caps the losses over a short time period, such as 60 days.
- Commercial Property Insurance
Commercial property insurance protects your company from direct property loss or damage from covered causes of loss. Again, “all risks” coverage would provide the broadest level of protection and potentially pay for the need to disinfect and decontaminate your property.
- Commercial General Liability
Standard commercial general liability insurance policies have two coverage provisions. Coverage A covers bodily injury and property damage liability claims, while Coverage B covers personal injury and advertising injury claims. Coverage A would be triggered in response to a customer claiming they acquired the COVID-19 virus from visiting your place of business or that your employee contaminated his or her property resulting in damage. The personal injury coverage is broadly defined to include trespass actions, such as a salesperson bringing the virus to a customer’s place of business and exposing the customers, and wrongful imprisonment, such as wrongfully placing someone under a quarantine. The advertising injury claims would include defamation and slander, such as statements made by one of your employees disparaging a competitor’s business as having been contaminated by COVID-19 if it were not true. Some of these policies have specific exclusions for viruses, pathogens or other communicable diseases.
- Directors and Officers Insurance
Directors and officers insurance is designed to protect your executives and company from liability for wrongful acts and covered losses, including security fraud class action lawsuits and government investigations. Given the recent drop in the stock market, these types of policies would cover securities lawsuits where a company is accused of providing misleading information that caused investors to either buy or delay selling their stock.
- Event Cancellation
Event cancellation insurance may cover your company’s losses related to trade shows, annual meetings or other events. Many of these policies were written as covering “all risks.” Orders prohibiting large gatherings will likely trigger coverage.
- Employment Practices Liability
With employee reductions resulting from shutdowns, there will likely be an increase in retaliation, wrongful termination and defamation claims brought by terminated employees. Your company should review those policies in preparation for what might be the second wave of COVID-19 litigation.
- Workers' Compensation
Workers' compensation insurance is designed to compensate employees injured during the course and scope of their employment. For example, if a healthcare worker is exposed to COVID-19 or a salesperson is required to travel overseas and becomes infected by the virus.
- Consult Counsel Regarding Your Rights and Responsibilities to Give Prompt Notice of Claims. Many of the above policies are “claims made” policies, which require that your company make a claim during the policy period. Your company should give notice of a claim before the policies expire. You will want to work with your attorneys to review the policies, give notice to the insurers, present your claims and review and respond to denial letters or insurer letters requesting additional information.
In closing, now is the time to examine your insurance coverage to maximize your company’s financial recovery from COVID-19 losses. Going forward, it is safe to assume that your insurers will specifically exclude coverage from losses, damages or claims resulting from coronaviruses, including COVID-19 and any future forms of the virus. You must act now in order to preserve your claims before your policies expire.