As the Coronavirus continues to spread, businesses are increasingly concerned about whether their insurance programs will cover Coronavirus-related losses.
Do I have Business Interruption coverage for this?
Business Interruption insurance, which offers protection against income losses sustained from disruptions to business, is typically purchased as part of a commercial property insurance policy. In order for the Business Interruption (Business Income) policy to trigger coverage, there has to be a “covered cause of loss.”
Property policies cover physical loss or damage to insured property resulting from a covered peril. Without physical damage from a covered peril, income loss associated with the Coronavirus (even if related to closure due to orders by a government authority) will not trigger property insurance coverage.
In addition, many policies have a Virus Exclusion, which excludes loss or damage caused by, or resulting from, any virus, bacterium, or other micro-organism that induces, or is capable of inducing, physical distress, illness, or disease. We cannot understate how important it is to conduct a careful review of the policy language.
ISO (Insurance Services Office) recently released two optional endorsements to address limited Business Interruption coverage related to the Coronavirus. In our discussions with carriers, they have to file these endorsements and also be willing to utilize them. As of now, we have not seen any companies who are interested in providing these endorsements going forward.
If my employee(s) contract the Coronavirus, is it covered by Workers’ Compensation?
Carriers have indicated they feel the Coronavirus is not a “Peculiar Occupational Illness,” and as a result, coverage would not be found in the traditional work comp policy.
So what makes an illness a “Peculiar Occupational Illness,” and therefore compensable under Workers’ Compensation? Two things must be concurrent before any illness or disease, including the Coronavirus, qualifies as occupational and thus compensable under Work Comp:
Whether an illness arises out of and in the course and scope of employment is a function of the employee’s activities. The simplest test toward determining whether an injury “arises out of and in the course and scope of employment” is to ask: Was the employee benefiting the employer when exposed to the illness or disease? Be warned; this “test” is subject to the interpretations and intricacies of various state laws.
For example, black lung disease in the coal mining industry is a disease that is peculiar to the work of a miner. Coal miners are subject to prolonged exposure to higher-than-normal concentrations of coal dust, leading to black lung disease. This makes the disease peculiar to the coal mining industry and, therefore, compensable. If the disease were pneumonia of a coal miner, there is nothing particular regarding the conditions and, therefore pneumonia would not be compensable.
Qualifying an illness or disease as occupational and, more importantly, peculiar to the work (and thus compensable), may ultimately require industrial commission or court intervention to sort medical opinion from legal facts. No one “test” is available to declare an illness or disease compensable or non-compensable; each case is judged on its own merits and surrounding circumstances.
If I don’t have coverage, what should I do?
Develop a plan of action. Discuss with key decision-makers now as to what the biggest concerns would be and what possible remedies for these issues are. Some of these could be:
Develop a communication strategy. Consider developing a plan for how you want to communicate with your employees, customers, suppliers, and other portions of your business. Human Resources officers or those in that role should pull together information about the Coronavirus to create a guide for employees that not only educates them about the viral infection but also enlists ways to avoid it. Employers need to know how to best decrease the spread of Coronavirus in their workplace in the event an outbreak happens and be able to communicate.
Discuss your sick leave policies. Would you want an employee who is sick to test the waters at work because they are worried about running out of “sick days?” The last thing a company would want is for an infected employee to turn up to work because they didn’t have enough paid time, nor an understanding that they could have gone to the doctor. Allow for parameters for sick employees to go to the doctor with proper symptoms to get checked, without feeling the pressure of being reprimanded.
Consider providing free preventive devices and items. Stocking up on sanitizers, masks, and other items now rather than later could be extremely helpful as demand increases. Providing these items for employee use both at work and home could be useful. Ask yourself, “Does the cost of supplies and planning benefit you now, or is it better to wait?”
Contemplate residual effects. Do you have employees who are at higher risk because of preexisting conditions? Should these employees be allowed to stay at home if there is an outbreak? What will policies be for parents who have to take absences for their children or family members? If schools were to close, what are the effects of our employees who are parents?
Please note that insurance coverage for Coronavirus will depend on the specific language used in each insurance policy. Further, risk managers should remain aware of the situation, and conduct a thorough risk review to evaluate how the Coronavirus could impact the organization.
Misinformation can be common, so do your best to educate yourself and your employees with facts. Look for resources from reputable sources and sites. For example, the CDC website, where some of this information was compiled, has prepared some good information on the subject: (https://www.cdc.gov/coronavirus/2019-ncov/specific-groups/guidance-business-response.html).
We will continue to provide more information as we obtain it. Please know we aren’t just wishing you “good luck” if this happens, we are willing to meet with you one-on-one to discuss your disaster recovery plan for this and other future issues.
This is general information. Please contact us to discuss your particular circumstances and policy coverage terms. Insurance carriers conduct a review of each claim filed to determine whether coverage is provided.
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