The economic impact of coronavirus is unknown, but it potentially may be severe, and businesses are likely to look at their insurance coverage to mitigate the outcomes. It is highly recommended that businesses thoroughly review their available coverages with their broker or an insurance attorney to determine what coverage may be available, as it is anticipated that many claims will not be covered by standard insurance policies. A recent article by Foley & Lardner LLP describes some of the typical policies carried by most businesses, and touches on the possible issues that are likely to arise with respect to claims under them. We have summarized them for you below.
1. Business interruption coverage
Most business interruption and extra expense insurance requires physical injury or physical damage to other business property before coverage is triggered. For example, a physical event like a a building fire that shuts down operations for a period of time can result in coverage, but is not clear if a claim made based on the physical illness (coronavirus) of people necessary for business operations would be covered.
2. “Civil Authority” protections
Insured business-owners may want to examine their coverage carefully to see if they have what is known as “civil authority” coverage. Designed to insure against losses from loss of income, and extra expenses incurred in the event that civil authorities prevent access to the business [due to civil unrest or other emergencies], “civil authority” may provide coverage for certain losses related to coronavirus.
3. Event Cancellation Insurance
This type of insurance protects your event-related revenue or expenses against cancellation due to circumstances beyond your control, but may contain some form of pandemic-related exclusions. With that said, policies should be carefully reviewed. Depending on the exact circumstances, there may or may not be coverage for particular losses.
4. Commercial general liability insurance
As an example, a customer [or others] may raise a claim that a business did not maintain a clean environment and as a result of that negligence, the claimant has contracted coronavirus. Claims like this have potential to trigger coverage, but there is also a chance that the claim would be excluded from coverage. Some commercial general liability policies may contain pandemic exclusions or force majeure exclusions that could be triggered. It is suggested that if a business becomes aware of an actual or potential claim of this nature, to immediately review its coverage and consider providing notice to its carrier.
5. D&O insurance policies
Directors and officers (D&O) liability insurance D&O insurance protects the company and its executives from certain claims made against them. The insurance will pay for the defense against certain lawsuits as well as any subsequent judgment or settlement action brought against an insured. For publicly traded companies, entity coverage is usually limited to coverage for securities claims. For privately held companies, entity coverage is more broad, subject to policy exclusions, and will afford coverage against the entity for claims based on any actual or alleged “wrongful act.” It is possible that this coverage may be triggered by the coronavirus pandemic. Therefore, a review of a business’ D&O policy should be undertaken for any coronavirus-related third party claims.