Perhaps no other event in recent memory has served as such a strong reminder that we truly live in a connected global environment. The most significant concern is for the health and well-being of ourselves and our families, and business owners and their employees. However, the potential for quantifiable hits to the bottom line are increasingly becoming apparent and deserves our attention.
Here at The Koch Company, we are receiving questions from our clients about whether or not this situation might have insurance coverage implications. On a high level, this event likely falls outside the scope of coverage. Reviewing this in more detail brings into focus these main coverage areas with the most potential for questions and discussion:
Alongside the daily updates of infected individuals and new case counts, we also hear news stories of closed businesses, schools, and other public venues. The fundamental purpose of property/business interruption insurance is to pay when there is a direct loss to physical property due to a covered peril. A pandemic disease would not be considered as causing direct damage. There is no damaged roof, burned out building, broken pipes, etc. causing the business interruption.
The scope and magnitude of this economic shut down has become greater and more widespread than what we probably could have imagined just a few short weeks ago. Even with the passage of the CARES Act, the ability of some businesses to recover is still in serious doubt. As a result we are seeing more headlines about lawsuits or legislation that could require insurance carriers to retroactively cover some business interruption losses. While on the surface this seems like a good source of recovery, the implications are tremendous. Solvency for some carriers could be at great risk. While the industry as a whole remains steadfast that these business interruption losses are not covered, predicting legal opinions and legislative actions on this topic are not as certain. Please keep in mind that we stand ready at any time to work with our clients to present a claim to our carriers. We are happy to engage in a review or conversation to answer questions or clarify the process if you would like.
Another concern might be whether or not your business or organization could be subject to allegations or claims of spreading the virus via allowing contact with an infected individual or not taking enough precautions to prevent contamination. If such a claim arises, coverage may be difficult to find in general liability policies. First of all, the virus, bacteria, and communicable diseases exclusions in general liability policies will be scrutinized by adjusters. Additionally, the question of whether there is actual legal liability for this type of event may be an issue. Similar to the need for direct physical damage in a property policy, a basic provision of liability policies is that the insured person or organization has some degree of legal liability for the loss.
The coverage with a lot of potential to generate multiple opinions and claims discussions is workers' compensation. It's commonly understood that workers' compensation will pay when an employee becomes ill from an occupational disease. An occupational disease is related to your workplace and caused by, or aggravated by the conditions of your employment.
As case counts continue to rise and more first responders and health care professionals are potentially exposed to COVID-19 the likelihood of claims from these types of occupations is now almost certain. In fact some states are in the process of considering new laws or emergency actions to automatically treat COVID-19 illness as workers' compensation for some classes of workers. These actions will likely make the process easier for some employees to file WC claims for their illness. The impact of this expected uptick in claims could have implications for all employers who purchase workers' compensation insurance. After several years of declining rates and favorable underwriting results, we may see the tide start to turn the other direction. Carriers' bottom lines could take a hit from increased losses at a time when premiums are not growing due to the economic slowdown. Continued vigilance in maintaining a safe and healthy workplace is key. Reach out to your loss control and safety resources for tips and ideas. Don’t forget those that are now working from home.
Employment Practices Liability
Navigating the rapidly changing landscape of regulations while balancing the need to maintain vital business functions is a challenge. Conflicts and differing opinions are sure to surface. Companies that have previously not dealt with employment practice allegations may find themselves looking to their employment practices liability insurance (EPLI) policy if and when these disagreements turn into formal allegations or legal actions. For more information about EPLI visit Mark Frantz's blog post here.
From the medical insurance perspective, we are seeing some carriers promoting the use of telemedicine options for initial consultation. The incentives and availability for using telemedicine can vary from carrier to carrier. Please consult with your benefits plan advisor for more specifics about your plan.
Trade Credit Insurance
Going forward, companies that have Trade Credit Insurance can expect to see tight coverage, but if used properly the information that is provided will help guide them as an extension of their credit departments. For more information about the current market trends visit our blog post here.
Anticipating every situation or scenario is not possible in this short commentary. Nor should the above comments be considered as an absolute statement about how your coverage may or may not respond. We encourage our clients to contact us with questions regarding this still-evolving situation.
Coverage Cancellations and Non-renewals
Insurance carriers are striving to help clients minimize disruption and are making decisions with guidance provided by state regulators. Many of the carriers we work with are communicating that they will place a hold on cancellation and non-renewal notices for insureds that advise they cannot pay their premiums due to events related to coronavirus. Insureds are encouraged to contact their insurance carriers directly, or your agent and account manager at The Koch Co., to request accommodations or discuss premium payment options.
New York's State Department of Financial Services (DFS)
New York's Department of Financial Services recently issued an emergency regulation that allows New York-based individuals and small businesses experiencing financial hardship due to COVID-19 to defer paying premiums for property and casualty insurance for 60 days. This grace period and other rights are temporary. For more information please visit the Department's website at https://www.dfs.ny.gov/consumers/coronavirus or your agent and account manager at The Koch Co.
Reopening & Returning to Work
The next phase of responding to the COVID-19 pandemic involves reopening your business and/or returning employees to the office or other on-site work locations. Visit our Business Planning page for resources and tools to help make this process as seamless as possible and supportive of the health of your employees, customers, and the community.
We have an established business continuity plan in place to remain in operation while maintaining the health and safety of our employees, clients, and the community. We will continue to be available to discuss your specific situation, questions, and concerns.
Legislative and compliance updates are changing daily. Review recent updates and announcements.
Everyday prevention methods like hand washing, staying home when you're sick and practicing social distancing are helpful ways to reduce the spread of the virus.
As this risk appears to be one that may not be transferred to an insurance carrier, it is important to identify and implement risk management procedures to avoid or minimize the impact.
As an employer, you want to protect your employees from health and safety hazards, and part of that includes communicating how to best use their benefits and how these programs are changing to respond.
This new and challenging situation has prompted the need for innovative and unique responses to support your employees and risk management plans.
The CDC, US Department of State, and The World Health Organization are helpful links for a range of information about the Coronavirus. Our local Nebraska Medicine also has helpful information and daily updates.