Many businesses are wondering how their Business Interruption and Workers Compensation may respond to COVID-19. As of this publication, for the most part insurance companies are not intending the Coronavirus to be considered an insured claim for Business Interruption as there is no Direct Damage loss to covered property. We have highlighted some of the common questions we have received below:
Is there any insurance coverage for Business Interruption losses due to the COVID-19 (Coronavirus)?
Business Income coverage requires a physical loss on insureds premises from covered cause of loss. Business slow down or closing to stop spread of Coronavirus is not a coverage trigger. Below is some sample policy wording:
ISO CP 00 30 06 07 (Business Income (and Extra Expense) Coverage form) We will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of your ”operations” during the “period of restoration”. The “suspension” must be caused by direct physical loss of or damage to property at premises which are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The loss or damage must be caused by or result from a Covered Cause of Loss.
Would coverage for Civil Authority respond if businesses had to be shut down due to the virus?
Civil or Military Authority pays for business income or extra expense loss suffered by you when there is damage by a covered cause of loss to property other than your premises and access to your premises is prohibited by action of civil authority. For coverage to apply, access to the area immediately surrounding the damaged property must be prohibited by civil authority as a result of the damage and your premises must be within that area. Below is some sample policy wording:
ISO CP 00 30 06 07 (Business Income (and Extra Expense) Coverage form) — When a Covered Cause of Loss causes damage to property other than property at the described premises, we will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises.
Is there coverage when our business experiences a Business Income/Extra Expense loss arising from the suspension of operations of our customer or supplier due to COVID-19?
If you carry the Dependent Property Business Interruption extension, this still may not trigger coverage since there is no direct loss at the dependent location. Below is some sample policy wording:
ISO CP 15 08 10 12 (Business Income from Dependent Properties – Broad Form) We will pay for the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration”. The “suspension” must be caused by direct physical loss of or damage to “dependent property” at the premises described in the Schedule caused by or resulting from a Covered Cause of Loss.
Could there be any other coverage on our property policy available to protect us for a loss of income?
Other terms, conditions and exclusions may enhance or eliminate coverage, including Ingress/Egress, Communicable Disease and Ordinance & Law. Therefore, your entire policy should be reviewed completely.
How does Workers Compensation respond?
COVID-19 (Coronavirus) creates a unique question when it comes to Workers Compensation. Most state’s Workers Compensation commissions focus on the same litmus test for an exposure, such as the Coronavirus. The two questions asked are 1) Was the employee in the course and scope of work? 2) Is the employee at a greater exposure than the general public? (i.e healthcare worker). However, there could be other scenarios that trigger a compensable Workers Compensation claim. For example, if an employer required an employee to travel to a country known to be experiencing a high infection rate for a conference and the employee contracted the virus, it could be argued that they were at a greater risk and in the course and scope of their employment. Overall, the majority of Coronavirus cases will not pass the course and scope and greater risk test to become a compensable claim.
Other additional resources related to Workers Compensation and Keeping Your Employees Safe:
One of Pritchard & Jerden’s principals and author of the Workers Compensation Playbook for Employers 3.0, Steve Heinen has published a video highlighting the facts of COVID-19 which can be accessed here.
If you suffer a loss (General Liability, Business Income, Extra Expense or Workers Compensation, etc.) we encourage you to notify Pritchard & Jerden. We can evaluate the situation and recommend next steps. We may recommend turning the claim into the insurance carrier for their coverage interpretation and respond accordingly.
The purpose of this document is to provide a brief description of highlight selected information including language from ISO standard policies and endorsements. It is not intended to completely identify all of the coverages and exclusions that are part of your program. The actual policy forms for your specific account are the only complete representation of exclusions and limitation and constitute the legal contract between you and the insurance company. Please read your policies for specific details of coverages as each situation and coverage interpretation may be unique.