If our business needs to shut down because of Coronavirus / COVID-19, do we have Business Income coverage?
- Business Income coverage generally applies when a business needs to shut down because of a direct physical loss at a covered location. Under most circumstances, carriers are not likely to view transmission (or potential transmission) of a virus would as a direct physical loss, so we expect them to deny claims for Business Income coverage. Some people have inquired about the Civil Authority Loss of Access coverage found in most property policies. This coverage typically applies when a location is shut down because civil authorities are responding to a direct physical loss within a certain radius of the covered location. Again, because the transmission of a virus is not likely to be viewed as a direct physical loss, Civil Authority Loss of Access coverage would not apply.
- One possible exception to this is for clients that have an inpatient / residential component to their business. There may be a sublimit available for Disease Contamination, which applies if a location is shut down by the CDC or a relevant health authority because of possible disease transmission. If you operate inpatient treatment programs, assisted living, or other human services facilities, you may want to discuss this coverage.
- In some cases, courts have found a direct physical loss to have occurred if a facility is contaminated and rendered uninhabitable. That said, there is exclusion language in many policies that may limit coverage in such cases. If this circumstance may apply to you, we encourage you to reach out to discuss.
If our Chinese (or any other) suppliers are shut down because of Coronavirus / COVID-19, do we have Dependent Business Income coverage?
- Similar to the answer above, Business Income coverage (whether first party or dependent) requires a direct physical loss from a covered peril. Without a direct physical loss causing the shutdown, there is no coverage trigger for Business Income. Nonetheless, this situation may be a good reminder to review the Dependent Locations on your Property schedule – while Coronavirus is likely not a coverage trigger, there may be other situations that could affect critical suppliers.
If there is an outbreak at our facility, is there potential Work Comp exposure?
- While this has not been tested for COVID-19, at this point, we do not believe that an outbreak of sickness would lead to Workers’ Compensation claims. That said, if carriers or industrial commissions determine there are valid claims because people are kept out of work or need medical treatment because of something they caught at work, we expect these would be covered by Workers’ Compensation policies.
- If employers are extremely negligent or force people to come into work against the advice of authorities, there may be more potential for exposure to Employers Liability claims or other claims outside of Workers’ Compensation, so employers should monitor and comply with any guidance issued by state, local, or federal health authorities.
- Additionally, if an employee is exposed to the virus because they are traveling in a high-exposure area, Workers’ Compensation is likely to apply. That said, there may be some ambiguity as to whether the exposure arose in the course of the employee’s work.
If our product is contaminated and gets someone sick, is our liability covered?
- Based on our current understanding of how COVID-19 spreads, this type of event seems unlikely. That said, if your product is contaminated or otherwise infects someone with the virus and someone seeks to hold you liable, a General Liability policy would typically cover this as a bodily injury claim. Certain exclusions may apply under your policy. If you have concerns about contamination and would like to review your policies accordingly, please let us know.