The landscape of insurance coverage in this era of the COVID-19 Pandemic is likely to change as insurance lawsuits are being filed to determine scope of insurance coverage. Meanwhile, in direct response to COVID-19, several states are attempting to modify Commercial General Liability (CGL) Insurance policies through legislation to provide coverage, particularly business interruption insurance, post hoc-after the fact. President Trump has commented that businesses have paid premiums for business interruption insurance for years and relief should be available to insureds. It is important for businesses to take precautionary measures to preserve whatever coverages might be available, especially as the case law and legislation changes to meet the COVID-19 pandemic.
The coverages that may assist in this pandemic extend beyond business interruption insurance. These include first party and third party coverages. Both types of coverage require proper timely notice to the insurance company.
FIRST PARTY COVERAGE
The first party coverage that may assist with this pandemic include:
- Property and Hazard Coverage
- Travel Insurance
- Event Insurance
- Specialized Coverages like Supply Chain
A very detailed review of your first party policies should be done to examine for possible areas of coverage. For instance, in addition to a straightforward business interruption coverage, there may be issues of coverage under:
- (1) chain of supply provisions;
- (2) condemnation or eminent domain may provide coverage for government required COVID-19 closures especially for places like restaurants, nail salons, spas or personal services venues;
- (3) extra expense coverages, which usually require physical loss, but that concept is being widely challenged or reinterpreted and therefore it is possible that the cost of replacing vendors, the cost of customers who cannot pay, the need to outfit the staff for stay at home work, or other losses caused by the COVID-19 virus may be covered; and
- (4) other costs incurred to prevent loss, such as decontamination if the virus was in your space, or costs to hire vendors to mitigate damage such as public relations firms, outside support services for operations, alternative logistics or other entities to enable your functioning.
THIRD PARTY COVERAGE
The third party coverages that may assist with this pandemic include:
- Comprehensive General Liability Insurance
- Commercial Auto Coverages
- Directors and Liability Coverage
- Errors and Omissions Insurance
- Malpractice Coverage
- Workers Compensation Coverage
Again, a very detailed review of your third party policies should be done to examine for possible areas of coverage. On the third party policies, are there problems that expose you to claims by employees or third parties that arise from COVID-19? Could someone claim you dangerously exposed them to the pandemic virus without following state mandated orders? Could someone claim you released HIPAA protected information to warn of the COVID-19 virus? Could someone claim that your attorneys missed a filing deadline because of interpretation of ever changing court orders about closures? Could someone claim you did not provide virus free auto drivers or did not decontaminate a vehicle? The possibilities are only limited by the creativity of lawyers.
FIRST AND THIRD PARTY POLICIES HAVE NOTICE PROVISIONS
To protect business interests the first step is for businesses to put insurers on notice of potential claims under their various policies. THE ONLY LANGUAGE THAT GOVERNS WHEN TO GIVE NOTICE, HOW TO GIVE NOTICE AND THE CONTENTS OF NOTICE IS IN THE POLICY. What a broker or claims representative tells you is not binding, is not always correct and will not usually be a defense to a failure to give timely notice under the policy. Further, since many insurers providing claims made policies are crafting specific exclusions for COVID-19 for renewal policies, putting insurers on notice for the current policy year before renewal is very important. Notice of circumstances giving rise to potential future claims can be given even if no claims are known. Actual damages are usually not required in policy language, and if you wait that long, it may be too late because you will be in a new policy year and the COVID-19 virus is possibly excluded. So businesses need to carefully examine the Notice provisions, and err on the side of notice to the insurer including all possible claims to preserve rights. The insurer may assert many bases for denying coverage, but late notice is an easy one to avoid and prevents an additional litigation point.
McKENNA IS HERE FOR YOU
Although working remotely to promote safety from the virus, the McKenna Firm remains open and ready to assist you with all your insurance coverage, business, transactional, employment and litigation needs as well as your personal financial planning needs. For more information, please contact Sara E. Cook, Managing Partner and she will put you in touch with the attorney best suited to assist you. Scook@mckenna-law.com or 312.558.3900