Insurance Coverage for Losses Related to the Coronavirus
Date: March 23, 2020
The COVID-19 pandemic is already harming many U.S. business operations, and it appears likely to do so for weeks or even months. Now is the time for businesses to begin analyzing the financial impact the coronavirus is having on their overall operations and determine whether they have insurance coverage for any losses associated with the virus.
As with any insurance policy-interpretation question, whether any coverage exists for coronavirus-related claims must be determined on a policy-by-policy basis. However, the following policies may provide coverage depending on the particular circumstances:
- Business Interruption – business interruption insurance is typically triggered as a result of “direct physical loss” to insured property; coverage may be available if a covered premises is rendered uninhabitable by bacteria, gases and fumes, and, possibly, the coronavirus.
- Contingent Business Interruption – this coverage is typically triggered by damage to a business’ suppliers, trade partners, and/or customers; these policies typically do not require any physical damage to the insured’s property.
- Civil Authority – civil authority insurance may cover an insured’s losses associated with a government shutdown and/or restricted access to an insured’s business.
- Workers Compensation – this coverage is typically triggered when an insured’s employee is injured during the course and scope of his/her employment.
- Environmental/Pollution – some environmental policies may provide coverage for costs associated with disinfecting property; but these policies may also exclude coverage for viruses.
- Commercial General Liability – CGL insurance may provide coverage to businesses responding to a third-party injury claim related to the coronavirus; CGL policies may exclude virus-related claims, however.
- Commercial Property – this coverage is typically only triggered in the event of direct physical damage to an insured’s property by a “covered cause of loss”; some policies may have coverage for loss of business income related to the coronavirus.
- Directors & Officers/Errors & Omissions – this coverage may be triggered if company executives are accused of wrongful conduct related to a drop in share prices and/or securities fraud.
- Event Cancellation – this insurance may provide coverage for losses associated with the cancellation of business events (i.e., trade shows); these policies may not respond to voluntary cancellations.
As always, insurance coverage will depend on the specific terms of the pertinent policy. Businesses should be locating and checking their insurance policies and consulting with insurance professionals about coverage for coronavirus-related losses.
Businesses should also be instituting procedures for collecting and organizing data supporting coronavirus-related damages as soon as possible to ensure nothing falls through the cracks. While a multitude of coverage disputes surrounding coronavirus-related losses are inevitable, businesses should already be saving receipts and setting-up coding in their accounting systems to track losses related to the pandemic. Documenting coronavirus-related costs now will make substantiating any future insurance claims markedly easier.
In sum, businesses should be identifying potentially applicable insurance policies that might provide coverage for coronavirus-related losses and tracking virus-related damages now.
FOR MORE INFORMATION
For more information, please contact:
Christopher M. Bechhold
Sean P. McCormick
or any member of our Business Litigation practice group.
We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our COVID-19 Task Force page for additional information and resources.
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