Most businesses purchase commercial insurance policies intending to protect themselves from almost any eventuality. A widespread health crisis like COVID-19, also known as the coronavirus, and its related business impact, is no exception. This virus has become so prevalent worldwide, the World Health Organization has declared it to be a global health emergency.
Not only does the coronavirus have severe implications for public health, it also has repercussions for the business world, as evidenced by the wild fluctuations in financial markets and the widespread interruption of normal business operations. Regardless of industry, it is critical for you to consider how the coronavirus could impact your company, and whether any losses caused by the virus are covered by available insurance.
Businesses and schools closed, events cancelled, contracts delayed or abandoned; All of these add up to a loss, one that can wreak havoc on a business of any size. And often times, we don’t consider that a monetary loss attributable to these events might be covered by your existing insurance. As an example, losses due to the work stoppage or interruption of regular business operations may be covered by your property insurance policy’s business interruption insurance.
Whether coverage is provided for such losses requires the insured/policyholder to look at the consequences of the coronavirus from all angles, beyond just lost production time. One of the requirements to trigger business interruption insurance typically is the requirement that there be “physical loss or damage” resulting from an event, in this instance, potentially the coronavirus. For some businesses, meeting the elements necessary to trigger business interruption insurance will be easier than for others. For example, a business or cruise line with infected employees or passengers will more easily be able to prove that coverage under their business interruption insurance is triggered in comparison to a company whose contract was delayed or cancelled, but with no contamination on premises. But again, even in the latter instance, the insurance policy must be analyzed to determine whether coverage is triggered as not all policies have the same triggering events.
Further, consider the impact to global supply chains which can alter the normal course of business. The amount of trade that originates or goes through China, the hardest-hit nation, and other coronavirus-afflicted countries, will have a ripple effect for many businesses, whether or not they are dealing directly with internationally related companies. Your insurance policies may provide coverage for “supply chain” and “contingent business interruption” (specific types of coverage afforded by some policies) if such claims are attributable to the coronavirus.
As is apparent, the coronavirus lends itself to a host of potential claims. Whether these claims will be covered under your current insurance policies depends on the unique facts of each claim and the specific language in any potentially applicable policy, with each claim being evaluated on a case-by-case basis. In many instances, physical property damage might have to occur before an insurance policy is obligated to respond. In other situations, a loss of use of property is sufficient to trigger a policy.
Ultimately, it is necessary to carefully identify the losses that your company may suffer to ascertain whether a policy provides coverage. Assessing the risks stemming from a global outbreak might seem daunting, especially if your business has a far reach, but it is vital for you to know the facts and options.
Assessing this risk is not something you should endeavor to undertake alone – our knowledgeable team is ready to provide you with the counsel and guidance your company needs. For more information, please contact Meyer, Unkovic & Scott’s Beth A. Slagle at BAS@MUSLAW.com and Andrew L. Noble at ALN@MUSLAW.com.