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InsuranceMan 2.0!!! - Coronavirus & Insurance (real information)


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Good Friday to you dear ADI readers,

 

     As you know (or you should know by now), I put up a TMIT entitled “Coronavirus” that was done in jest to try and alleviate some of the stress and tension that is surrounding this pandemic.  It was done for fun and to be funny.  This virus IS a serious issue and is having economic ramifications that are far and wide and will be felt for quite a while to come.

     With that, I did want to put up a more serious insurance post.  I, InsuranceMan 2.0!!! have been speaking with quite a few clients recently asking about how insurance may apply to this virus.  More specifically, is there any kind of coverage that may pay for diminished sales due to the pandemic?  What about if our employees contract the disease?  Well, dear reader, let me address these quarries here so that you can know and be well informed too.

     The first question I will address is this, “Is there any type of coverage for a disruption to my business due to the Coronavirus?”  The short answer is that it simply depends on a lot of things.  It depends on what carrier underwrites your policy.  It depends furthermore on the language of the policy, as well as the coverage options that you have chosen.

     One area that this potentially could see coverage would be under your “Business Income (or “Interruption”) & Extra Expense” (hereafter referred to as BI/EE) portion of your coverage.  If you do not have that coverage, then there is no coverage available.  Some carriers offer it as part of their overall suite of coverage enhancements, with others it has to be specifically asked for and a premium charge usually results.  The only way to know if you have this type of coverage would be to check your policy or call your agent, or send them an email, or whatever you chose.

     Generally speaking, BI/EE coverage usually requires that a covered direct physical loss take place to the insured property.  So, the question becomes this, is a pandemic a direct physical loss to your insured property?  The quick answer would be no.  It is not like a fire, wind incident, or smoke damage type of encounter that is normally contemplated and associated with this type of coverage trigger.  However, several courts have determined that “property damage” can include property that is deemed “uninhabitable” or “otherwise unfit for its intended use” to be included in the meaning of “commercial property” which then may make this a covered direct physical loss.

     With this scenario mentioned above, if you facility were to be shut down due to the Coronavirus, for decontamination, etc., then it is quite possible that a case could be made that your facility was deemed “uninhabitable” or “unfit for its intended use” and therefore the BI/EE coverage could be contemplated.  However, if patrons just have decided not to go out and eat, drink, socialize, and have a good time, it would be very difficult to say that the drop in sales is a DIRECT EFFECT of the Coronavirus.  It may be a correlation, but in a courtroom that may not be enough to show cause as a certain DIRECT RESULT of loss of business.

     Interestingly though, what if the whole area surrounding your business is shutdown and quarantined?  This could also be known as a “CIVIL AUTHORITY” closure and that is usually specifically addressed in the BI/EE section of the policy.  Here is a snippet from a policy I recently wrote for a client:

 

Civil Authority

We will pay for the actual “loss” of Business Income you sustain, and necessary Extra

Expense you incur that is caused by action of civil authority that prohibits access to the

described premises due to direct physical “loss” of or damage to property, other than at

the described premises, caused by or resulting from any Covered Cause of Loss.

The coverage for Business Income will begin 72 hours after the time of that action and will

apply for a period of up to four consecutive weeks after coverage begins. The coverage

forExtra Expense will begin immediately after the time of that action and will end:

a. Four consecutive weeks after the time of that action; or

b. When your Business Income coverage ends; whichever comes first.

    

     Here we see again that language of “actual ‘loss’”, which this may qualify as since it goes on to say, “… described premises due to a direct physical “loss” of or damage to property …”  As described above, “uninhabitable” or “unfit” may very well qualify in this case.  You will notice though that there is a “72 hour” wait time, similar to a deductible, meaning that if you are shut down for less than 72 hours, coverage will not apply.  As well, you will see specific language that states that the coverage will end after four consecutive weeks of being shut down or you exhaust your limit of coverage. 

     Not to go too far down the rabbit hole here, but if you were shut down for a week due to civil authority (7-days), you would have a 3 day waiting period and potentially be eligible for 4 days’ worth of BI/EE.  If they opened your area back up, but then shut it down again a day later that would constitute a separate event and the whole thing would start over again.  If you were shut out of your facility for 2 months, well, the first 4 weeks (or potentially your full limit is reached) would be covered, but then it would end after that fourth consecutive week.  Just wanted to clarify that.

     OK, what about the case where you are still up and running but you have a supplier that is not, and it is now impacting your operations?  Or, you are still up and running but maybe the distributer is shutdown due to the virus?  If you have the “Contingent Business Property” endorsement under you BI/EE coverage, you may have a claim.  Here is another snippet from the same policy:

 

Contingent Business Property

We will pay for the actual “loss” of Business Income you sustain, and necessary Extra

Expense you incur when Contingent Business Property is damaged by a Covered Cause of

Loss. We will reduce the amount of your Business Income “loss,” other than Extra

Expense, to the extent you can resume “operations,” in whole or in part, by using any

other available:

a. Source of materials; or

b. Outlet for your products.

The most we will pay under these sections B. 1., 2., and 3. combined is $300,000 for any

one occurrence.

 

     As you can see here, there may be coverage for you to pay to source your materials from somewhere else, or to pay to assist you in selling your products through another outlet, if possible and permissible by state law, etc.  The additional cost of these would reduce your BI/EE limit, but if you can stay operational even if it costs a bit more, but the carrier would pick up that difference (up to the $300,000 amount illustrated in this policy coverage), it would be better than having to out of pocket it yourself.

     This brings us to Workers Compensation and the impact of the virus.  Workers compensation does cover employees that are injured on the job, either in a physical sense, or in a disease sense.  The limits are even broken out as “Bodily Injury by Accident”, and “Bodily Injury by Disease”.  Here again though, it is going t be difficult to make a claim simply due to the fact that it would have to be proven that your employee contracted this virus while performing duties associated with your business, i.e., while “on the clock”.  Being that the virus can live on surfaces, or be transmitted in a number of different ways, and may lay dormant for a time period, it may be a challenge to pinpoint that your employee picked this up on work time and not on personal time.

     If this type of instance arises, I would advise that you proceed as normal by placing a claim with the workers comp company, have a claims representative assigned to your claim, and let them make the determination as to when and where the employee may have contracted the disease and if coverage is applicable or not. 

     The end story here folks is that that whether you may be looking to put a claim in under your package policy for BI/EE, or if you are dealing with a sick employee, expect the insurance carriers to meet you head on with pushback.  We are talking about a pandemic here that is far reaching and could end up being very costly … even more so that it already has been.  It has and will continue to wreak havoc on our economy and I don’t know of anyone that will be jumping up and down waiving their hands in the air wanting to be first in line to pay for whatever the end result of all of this will be.

     I would advise however, the old adage of, “You won’t know if you don’t ask” may apply here.  If you are shut down due to civil authority, or if you have an employee that believes they contracted the disease while at work, put in a claim.  The worst that could happen is that the carrier says that there is no coverage and the best that could happen is that they say that there is and you obtain some relief.  Either way, it is better to make the carrier out to be the big bad wolf than taking the fall yourself for not doing anything.

     I hope you all stay well, stay health, wash your hands like a surgeon scrubbing in for a 10 hour procedure, cover your coughs and sneezes, and just be safe.  I, InsuranceMan 2.0!!! have a dear place in my heart for all of you and I want all the best for you.  If you do have questions about how the virus may impact your business and if there is an insurance solution for it, or any other insurance questions at all, please do not hesitate to reach out to me.  Until next time dear readers …

 

Stay Vigilant (and healthy),

Aaron Linden

a.k.a InsuranceMan 2.0!!!

(307)752-5961

aaron@roaringforkins.com    or    insuranceman2.0@yahoo.com  

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