Insurance and Covid-19 usually come together in commercial insurance policies. The relevant part of a policy is usually referred to as “business interruption” coverage. This issue was recently discussed in an article published in the National Law Review. Here is a what a lot of what the article tells us. Keep in mind that each state and each policy will have its own ways of reading and enforcing these policies.
The impacts of the Covid-19 are far-reaching. Concern about lost revenue, liability for the health and welfare of workers, their family members, and customers remain top-of-mind for all businesses. As a result, many businesses have started to question whether they might have insurance coverage available to respond to this unprecedented situation. Although the analysis of any particular claim for insurance benefits will vary based on the specific language of insurance policies and the circumstances of each case, here is a summary of common insurance considerations in light of the Covid-19 pandemic.
As it relates to lost revenue many commercial property insurance policies provide coverage for financial losses due to business interruption suffered as a result of “direct physical loss or damage” to covered property (these are the most commonly used words in a policy) – often the business’s physical facility. If coverage is afforded, insurance may be available to cover lost net income and operating expenses while operations were suspended.
Whether a property has suffered “direct physical loss or damage” is a potential area of dispute that may vary by state law. Some courts have found that this requirement may be met if insured property is rendered useless or is substantially impaired as a result of certain contaminants. These cases are fact-specific and, in this environment, insurers are routinely taking the position that there is no coverage for business interruption losses attributable to COVID-19 because the virus has not caused “direct physical loss or damage” to property. Secondarily, many insurers are denying claims based on various common policy exclusions, including exclusions for “loss due to virus or bacteria.” These denials have already led to a handful of lawsuits around the country, and it is likely different rules will continue to emerge.
In an effort to address property and business interruption insurance coverage disputes relating to losses attributable to the Covid-19, many states have been proactive in evaluating whether to provide additional protection for impacted businesses. State legislators in many states are trying to pass bills that will help business owners.
Now, what about sickness due to Corvid-19? This includes workers’ compensation, employers’ liability, and commercial general liability policies.
Many businesses – particularly businesses remaining open during the Covid-19 pandemic, have concerns about customers, employees, and their family members getting sick as a result of being exposed to the virus at their business. These concerns raise coverage questions under multiple types of insurance policies.
Sickened workers may be entitled to workers’ compensation benefits, which typically would be covered under workers’ compensation policies.
Customers claiming to have become sick as a result of coming into contact with the Covis-19 at a specific business present different insurance concerns. Such claims likely trigger coverage under commercial general liability policies, which cover liability for “bodily injury” of certain people.
If an employee becomes sick at work, it is possible that he or she could also infect family members or others outside of the workplace. Although relatively rare, some businesses have been sued by family members of employees claiming to have been injured as a result of their “secondary exposure” to workplace conditions. Many states have taken the view that such “secondary exposure” claims are permissible and are not barred by the same rules that bar similar claims by employees. Although these claims are for “bodily injury,” typical general liability policies contain exclusions for claims brought by employees and their family members. This creates a potential gap in insurance coverage for businesses.
Obviously, businesses need to do their best to protect the safety of themselves, employees, and customers.
From the standpoint of their insurance policies, business owners should not give up too quickly on whether or not their policies will help them. Let an insurance lawyer review the policies and give some direction on where what can or cannot be done with the policy.