As you are maneuvering through the various economic minefields and other challenges of the global coronavirus crisis, it’s important to review your insurance policies and communicate with your brokers to determine whether some or all of the extra expenses or lost earnings might be recoverable under your insurance policies.
Check Your Policy. Most standard commercial general liability policies either do not provide for business interruption coverage or, to the extent they do, they afford coverage only when the loss is caused by direct, physical damage to an insured’s property that negatively impacts business activities. For example, business losses caused by a natural disaster such as a tornado that physically destroys your plant or offices so as to prevent actual operations is the type of event contemplated by standard business interruption coverage. Extra expenses incurred or lost earnings occasioned by having to shut down your operations due to the coronavirus, especially as a preventative measure, is not likely recoverable under most policies. In addition, many policies have exclusions that may likewise preclude such coverage.
Be Creative. Nonetheless, it is still prudent for you to evaluate your policies to determine what coverage there may be. Depending on how you have may experienced actual exposure, there may be creative ways around the typical limitations. For example, the confirmed presence of coronavirus on a physical surface at your site may be grounds for coverage. There are also policies that have special business interruption provisions that may afford coverage for extra expenses or lost earnings. Likewise, there may be other coverage, such as crisis management coverage or event-specific cancellation coverage, that might provide an opportunity to recover some of those unique expenses or losses you are incurring to address the crisis.
Will the Government Help? In addition, it’s important for you to keep advised of any regulatory or government actions relating to insurance coverage that deal with the coronavirus crisis. For example, the New Jersey legislature just announced its intent to pass legislation mandating that insurers extend business interruption coverage to New Jersey insureds, regardless of whether or not a insured’s policy actually affords such coverage.
Action Steps. In terms of action steps, your first order of business should be to review your policies with your broker. If there’s any reasonable basis for pursuing coverage, it is worth putting your insurer on notice of a claim. You will want to do so sooner rather than later to ensure there is no issue about you having given the insurer prompt and reasonable notice. In addition, you should be collecting and maintaining documentation of all expenses or lost earnings that might be recoverable. In addition to obvious direct costs, keep in mind the possible indirect costs you might be incurring in having to address the crisis situation. If you can quantify such costs or losses, it is worth presenting them to your insurer for consideration.
As previously reported, Frantz Ward has established a Coronavirus Response Team to assist clients in navigating the multitude of issues presented by the current crisis. For assistance in addressing insurance concerns or in developing other strategies to protect your business, please contact Frantz Ward Partners Brian Kelly or Christopher Koehler and they will engage the appropriate members of the response team.