What a difference a week makes. Just seven days after our initial post, the world is a vastly different place. COVID-19 has reached pandemic status, national infection and death rates have increased exponentially, and life as we know it has dramatically changed. In addition to protecting yourself and your loved ones during this very difficult time, there are a number of steps you must take to preserve your business.
What You Should Look For:
Companies of all shapes and sizes should immediately undertake a comprehensive review of their insurance portfolios. Depending upon COVID-19's specific impact on your operations, there are any number of policies that could potentially apply (e.g., Pollution Liability/Environmental Impairment; General Liability; Workers Compensation, etc.). That said, the most likely source of potential coverage for most corporate policyholders will be their commercial property insurance. Property Policies (sometimes referred to as "All-Risk Policies") contain a series of provisions that could potentially respond to COVID-19-related losses. Such coverages include:
- Sue and Labor (costs incurred for the temporary protection/preservation of property);
- Business Interruption (loss of profits due to a covered event);
- Contingent Business Interruption (losses caused by damage to your key suppliers);
- Contagious Disease (losses due to the actual, or suspected, presence of a communicable disease);
- Cancellation of Bookings (losses due to the cancellation or inability to accept bookings);
- Civil Authority (losses related to an inability to access your premises due to government lockdown);
- Ingress/Egress (inability to access property as a result of an insured peril);
- Extra Expense (costs incurred to continue normal operations following a loss);
- Soft Costs (additional costs such as real estate/property taxes, legal/accounting fees, and advertising/promotional expenses); and
- Loss Adjustment Expenses (expenses incurred to prepare or certify the details of a claim).
Notably, many Property Policies require "direct physical loss or damage by a covered peril" as a prerequisite for the foregoing coverages. Some policies also explicitly preclude coverage for losses arising from viruses. Given the potential obstacles presented by such triggers and exclusions, a close reading of your policies is essential.
What You Should Do:
The insurance industry is facing losses on an unprecedented scale. Given the very real possibility that worldwide insurance claims will exceed the hundred billion dollar mark, you must act now. There is virtually no reason not to tender immediate claims under all potentially applicable policies – even if the full scope of your COVID-19-related loss is yet unknown. Simply put, the failure to promptly put your carriers on notice could mean the difference between a covered loss and a loss of coverage. Best practices include:
- Engaging Coverage Counsel to analyze your insurance policies and assist in the tender of claims;
- Retaining Forensic Accountants to comprehensively document your COVID-19-related losses; and
- Remaining proactive in the claim prosecution process.
Insurance carriers rely heavily on Coverage Counsel and Forensic Accountants to evaluate – and, in many cases, deny – claims. This is particularly true when the global financial stakes are so high. It is imperative that policyholders avail themselves of these same essential resources.
Finally, it is absolutely critical for your Marketing and PR teams to coordinate with your Coverage Counsel regarding any public statements concerning the virus. The natural, and understandable, tendency is to reassure the public that: (i) your business has not been directly impacted by COVID-19; and/or (ii) you are taking prophylactic measures to avoid any direct loss/harm. Although such statements make logical sense, they can completely undercut your insurance claim. Every public comment made by your company becomes discoverable evidence in a subsequent insurance coverage dispute. And carriers will use those statements to argue that your losses resulted from "voluntary" actions – as opposed to "direct physical loss or damage" (see above). Bottom line: If not very carefully crafted, your well-intentioned PR messages could singlehandedly eviscerate your insurance claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.