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chamber asked the advisors and consultants in risk management and HR at Gibson about the most common questions they are receiving from their clients during these pandemic times. We think you’ll find their responses interesting and helpful.
Why aren't COVID-19 business interruption claims being covered?
Two reasons. First, over the past 10-15 years, some insurance companies incorporated virus exclusions into their property policy language. Because nearly all business interruption insurance is part of a property policy, the presence of a virus exclusion precludes coverage for the COVID-19 event.
Second, insurance companies contend the pandemic—or more accurately, the ordered shelter-in-place and similar measures—does not trigger property-policy insuring agreements, which the insurers argue require (in more words or less) “direct physical loss or damage to tangible property at the insured premises.” This wording is the subject of current insurance recovery litigation, which will likely not conclude in the near term.
Going forward, additional exclusionary language is expected to enter property policies. The carriers which had not adopted a virus exclusion most certainly will. All property & casualty, regardless of whether they had implemented a virus exclusion prior to the COVID-19 pandemic, will likely support a public or private-public pandemic risk financing facility (in other words, eliminating pandemics from the realm of insurable risks). This may take the form of a federal backstop similar to the Terrorism Risk Insurance Act (TRIA) that was implemented post-9/11 or the National Flood Insurance Program (NFIP) that ensures flood coverage is available even for high-risk areas.
How are COVID claims going to affect the already hardening property & casualty (P&C) market?
Hindsight shows the P&C market has been hardening since the fourth quarter of 2018 or earlier. Rate increases accelerated throughout 2019. The reasons are many: some are event-driven, some are cyclical, while others are arguably systemic. The impact of COVID-19 goes beyond the claims it will generate (e.g., workers compensation or medical malpractice claims), and extends to its impact on premium levels. Demand for commercial P&C insurance generally tracks with GDP or other economic output measures. The pandemic’s economic impact will, in turn, lower premium volume (rate increases notwithstanding).
What coverages should I be buying to protect my business from these types of claims?
Insurance products evolve because of lessons learned; for example, there is a cyber liability policy in the marketplace today because business and individuals faced risk from a new peril that neither caused bodily injury nor property damage in the traditional sense. The same will be true, to at least some degree, for coverage related to pandemic loss. If not individual policies, then enhancements to existing forms and coverage terms could evolve that will address risk of disruption and loss due to a pandemic. This is evolving in the property and casualty insurance market and has the attention of many players, including agents, insurance companies, the government and, especially, business owners.
A governmental backstop could be years in the making, and it is most likely that the private market will respond quicker. However, those evolving solutions are unlikely to take place in the standard market and will fall to creative options in the excess and surplus lines market. There are many challenges to a single policy that businesses can purchase against pandemic risk—most significantly how the coverage trigger is defined. Is it the government declaring a pandemic? Is it number of symptomatic cases? Is it when a shutdown occurs? The risks against “pandemic” are simply too great for an insurer to quantify.
The answer could lie with individualized products. It is important that each business stop and focus on what their real risk against a pandemic is, and where do they incur costs or lost revenue. For some industries, the pandemic resulted in a boom economy—how do they protect themselves against things returning to “normal?” For grocery stores, which were deemed essential, what risks do your employees face now? How can you pivot quickly to accommodate social distancing needs and still hit sales goals? Addressing an individualized supply chain and thinking differently about how a business can mitigate its impact specifically is the future of risk management. A one stop “off the shelf, insurance policy solution” will no longer address all needs.
An employee tested positive for COVID-19, now what?
Employers should draft their protocols prior to any employees testing positive. Those protocols should include a statement that employees must notify HR as soon as practical if they have tested positive or come in contact with a person who has tested positive. The employee should be asked to assist with contact tracing and, HR should notify any impacted employees if there is a confirmed case in the workplace. Deep cleaning of any affected areas should take place by either trained personnel with proper PPE or by hiring an outside contractor.
Could my business be liable for someone getting sick at my establishment?
As always, it depends on your specific policy. Some liability policies specifically exclude liability for bodily injury or sickness caused by communicable diseases; others do not. If there is not an applicable exclusion, your liability policy could apply. However, the key factor is legal liability. You’d have to be found legally liable for coverage to be triggered. While it remains to be seen how a case like that could play out in the courts, if you’re following local and state recommendations for social distancing and keeping facilities clean, it will be harder to establish negligence or legal liability.
As for employees, the workers’ compensation statute of your state will determine if an employee getting sick is a compensable workers’ compensation claim. Historically, community-spread illnesses like the cold or flu have not been considered covered by workers’ compensation because of their prevalence in society that makes them not easily tied to the workplace. However, in light of the pandemic, some states have amended their statutes to presume compensability for some categories of workers.
Most importantly, whether you believe a claim or potential claim against you or your business is warranted, be sure to turn it in to your insurance carrier so proper investigation can be conducted.
How do I comply with local/state/CDC recommendations or regulations surrounding social distancing at work?
Social distancing best practices include but are not limited to workstations, cafeterias, common areas and office spaces. Specifically, employees are asked to:
- Stay six feet away from others when working or on breaks. Where a minimum distance cannot be maintained, engineering or administrative controls should be in place (e.g., face coverings, physical barriers, etc.).
- Avoid job tasks that require face-to-face work with others when possible.
- Avoid contact with others whenever possible (e.g., handshakes, high fives and fist bumps).
- Avoid touching surfaces that may have been touched by others when possible or disinfect prior to touching (e.g., conference room tables).
- Distance themselves from anyone who appears to be sick.
- Avoid gathering when entering and exiting the facility. Employees should also only enter and exit designated areas.
- Follow any posted signage regarding COVID-19 social distancing practices.
- Disinfect their workspace often.
- Avoid touching their face.
- Avoid nonessential gatherings.
- Stagger lunches to limit the number of individuals in the break room or cafeteria.
- Avoid congregating in common areas.
Gibson risk management, not the only solution to risk. We provide counsel and advice on complex business and people issues that go far beyond the scope of an insurance policy. Website 