Individuals and businesses are asking what insurance coverage is available for harm caused by the coronavirus. Here is a short survey addressing possible coverage under various policies:
Property Insurance – Typically, damage to tangible property caused by “covered causes of loss” is insured by a commercial property or homeowner’s policy. The policy frequently requires a “direct physical loss” to property. Loss caused by fire or hurricane are examples of covered perils. Tangible property that becomes unusable may be covered. Some courts have found that contamination rendering property uninhabitable constitutes a “physical loss.” Arguably, these terms do not rule out the possibility of damage caused by the presence of microscopic organisms, nor do they require that loss or damage be visible. Issues faced by an insured, however, may include the cause of the loss, whether an exclusion for viral contamination applies, or whether a building was unusable or voluntarily closed.
Business Interruption – An endorsement may include business interruption coverage for loss of income due to suspension of business operations. The closing of a business must be due to a covered cause of loss. Actions by government or law enforcement forcing the closure of a business may be a covered cause of loss. Restricting access to a business where transmission of an infectious disease is suspected may lead to coverage for income losses. Business interruption claims can be complex and often require the assistance of experts such as accountants.
Contingent business interruption coverage applies if a supplier to the insured’s business has to suspend operations, thereby impacting the business of the insured.
There are at least seven states considering legislation that would mandate insurers to provide business interruption coverage. The constitutionality of such legislation is doubtful. Insurers will argue the terms of a policy cannot be changed retroactively. Other states (California and New York) have ordered insurers to be transparent and explain the coverage that is available and/or explain why coverage will not be afforded.
Federal legislation is currently being proposed to create a reinsurance fund for business interruption losses caused by coronavirus or other pandemics. The legislation would be similar to that created after the 9/11 terrorist attacks. The reinsurance program would mandate that coverage apply to claims relating to a pandemic. Carriers would be required to enlist to be eligible. Insureds would be covered for an additional premium.
Directors and Officers – If a corporation faces a securities lawsuit due to its failure to disclose the impact of coronavirus on its business, a directors and officers policy may be implicated. With the recent stock market plunge, investors are likely to investigate whether proper precautions were taken to reduce losses in the stock market and elsewhere. Another claim might arise from shareholders or customers asking why cruise lines continued to operate knowing the presence of coronavirus was rapidly increasing.
Workers Compensation – Employees contracting the coronavirus at the workplace or in the course and scope of their employment may seek coverage under workers compensation. Further, employees traveling from the workplace to an infected area or workers stationed in an infected area may seek coverage under workers compensation if they become infected.
Liability Coverage – Liability policies typically cover bodily injury or property damage caused by an occurrence, or accident. Liability policies protect businesses against third-party claims for bodily injury resulting from exposure to dangerous conditions. Guests of hotels, restaurants, malls, sporting events, cruise ships, or an office could sue the owners and/or operators of such facilities if they become infected with the virus. Such suits would likely be based upon the owners and/or operations’ failure to exercise reasonable care in guarding against the danger or failing to warn customers. Liability policies, however, may exclude a virus.
The availability of coverage under various policies will heavily depend upon the facts surrounding an incident and the policy language. As always, give notice to the carrier as soon as possible after a loss and document the loss as completely as possible
Be safe and check your coverage.
For more information on this article, contact Tred at 531-8031 or email him at te@hawaiilawyer.com.
