Business Insurance and the Coronavirus – (COVID-19)

Business Insurance and the Coronavirus – (COVID-19)

“Pandemic”…  When we hear that word, our minds reference historic outbreaks such as smallpox, the bubonic plague, and various strains of influenza.  Epidemics have shaped history and impacted companies, even in modern times.  The current Coronavirus – also known as COVID-19 – has society shutting down businesses, shelter-in-place orders, it has us talking about washing hands, social distancing, and flattening the curve.  This terminology focuses on the pandemic instead of supporting businesses, from landlords to non-profits, which means that companies may not be able to operate and/or are forced to significantly reduce operations, disrupt supply chain, and limit business travel. Record number of trade shows and conferences are cancelled, and employee terminations are in question under current and upcoming conditions.

States and many counties preventing landlords form evicting tenants during this pandemic may result in loss of rents, schools have extended spring breaks and are possibly not going to open until the Fall, restaurants are resorting to pick-up orders, hotel chains have record numbers of vacancies, and gatherings over a certain number have halted.  Manufacturers’ supply chains have been disrupted and Non-Profits have been hit hard since thousands of them work directly in person and require close contact.  Apartment Owners now face risk of losing rents and possibly liability lawsuits from this.  This situation has and will more than likely lead to an additional loss of business income and leave company owners wondering about their insurance coverage and if there is coverage during this Pandemic.  It is imperative to understand all of this and what are best next steps for every business owner.

Bottom line… Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators.  Business interruption does not, and was not designed to provide coverage against communicable diseases such as COVID-19.  Of course, ever policy differs in its nuances, but generally infectious diseases and pandemics are excluded from most if not all standard insurance policies.  This being said, there is a lot of active talk right now between congress, insurance regulators and the insurance companies about what can be done to help during these unprecedented times.  This is one of the main reasons it has never been more important to have an insurance broker who understands your coverage’s, is staying informed with the hour to hour changes from the government, and most importantly is willing and committed to fight for you, your families and your businesses.  This is what we are doing here at GSI!

So, let’s get into this a little deeper… What polices are most likely to be affected by Covid-19 and how will they respond?

Business Interruption

Business interruption covers loss of income due to a loss such as a fire on the premises or for contingent business income, a supplier or a hurricane.  With a global outbreak such as Coronavirus, your employees may be required to work remotely or not work at all due to quarantine or other restrictions.  Business Interruption is a common coverage on a business owners policy or commercial property policy.

Why isn’t business income coverage covering your business during this pandemic?  Most standard policies have been designed and priced to require some type of direct physical loss or damage to either your premises or some part of your supply chain for this coverage to be triggered.  Without this trigger, most if not all insurers stance at the time of the claim will likely be that a virus/infectious disease in your facility did not create a physical loss or damage.   On top of this, viruses and diseases are typically specifically excluded on all standard business owners’ policies.

Does standard commercial insurance cover disease outbreaks?  Unfortunately, the likely answer is no, but that doesn’t mean companies are at a complete loss.  Referencing your specific policy is vital, but there are a few situations where you may already have coverage which is why it’s important to understand your policy and speak with your agent.

There is potential coverage through communicable disease through communicable disease coverage under specific carrier forms if the insured is required to close their operation by a “public health authority” order for closure, decontamination, etc.  Unfortunately, this coverage is limited and often is offered at a sub-limit which is much lower than your primary limits.  It’s important to consult your insurance agent to find out what your policy wording includes and if there is any coverage available.  It’s also extremely important that your broker is providing guidance around your coverage and can answer specific questions around this and how to best maximize all claims situations.

Extending civil authority coverage… historically, such as during the Ebola crisis, there have been special endorsements added to policies specifically excluding infectious diseases like COVID-19.  In 2014, the ISO offered business interruption coverage under its Ebola-related commercial property endorsements, so it is possible to obtain extending civil authority coverage but unlikely available for today’s outbreak.

Additionally, this type of insurance can cover circumstances where the government deems your business or its surrounding area unsafe. Since then, most carriers have added a specific exclusion for infectious diseases, which is one of the reasons most business owners’ policies exclude contagious diseases.

Commercial General Liability Insurance

Apartment Owners, Property Managers, Restaurants and many other businesses may face the risk of failing to protect others from exposure from infection on their premises.  The hospitality industry is particularly vulnerable.  Many standard general liability policies for businesses contain bodily injury clauses that include diseases, but those are in place to protect your business in case of the accidental spreading of pathogens or if someone gets injured on your premises.  These policies typically include limitations about pollution, but – again – the definition “pollutant” is vague and would need to be determined by a court.  The good news here is that insurance companies have a duty to defend and should meet that obligation even if there is just a possibility of coverage on the underlying policy.  There may be an uptick in these types of claims in months to come with so many getting sick so don’t wait to make sure you are properly covered.  Having the right agent has never been more important to stay ahead of this and make sure you have the best outcome in case of a claim like this does occur.  Errors and Omissions coverage may also be triggered for real estate owners and/or property managers as their tenants face financial losses resulting from mismanagement of their response to this pandemic.  So be proactive and consult with an expert if you’re not sure what to do.

The definition of “pollutant” can be unclear, so it’s best to consider outbreaks excluded from insurance policies in this situation.  Some would argue that an environment is unsafe for work due to a contagion, in essence, “damaging” the property by deeming it dangerous.  Policy language differs from carrier to carrier on how it will respond to infectious diseases.  This is one of the reasons why a pollution policy should be recommended for some business owners because they are much broader in language and can extend coverage where a typical commercial general liability policy will not, since it’s not designed to offer pollution coverage.  Do you have information overload yet?  Another reason what why having a consultant that is specialized in your industry is essential.

Supply Chain Disruption Insurance

Hundreds of thousands of businesses today rely on overseas suppliers for their operations.  Food manufacturers, auto parts manufacturers, clothing manufacturers are just a few that are feeling the pain right now with their supply chains being slowed down and/or completely halted.  This is resulting in less revenue, layoffs and possible closure of facilities.  Manufacturers and Distributors can take additional steps to limit the impact of supply chain disruption such as warehousing inventory and using multiple suppliers where possible.  Supply Chain Disruption Insurance exists to cover interruptions of raw materials, parts and supplies.  These policies are typically triggered as a result from physical damage on the premises of the named or unnamed supplier.  It’s also important to note that this coverage typically only covers losses stemming from disruptions from specific suppliers scheduled on your policy.  In addition to this, these policies typically require that your supplier also suffer the type of property damage that would be covered in the insureds first-party policy.  Unfortunately, bacteria and virus exclusions will also likely be listed on these policies.

Worker’s Compensation

The outbreak has already resulted in workers compensation claims being reported.  We are expecting this number to rise in the coming days and months.  Each claim is different and will depend on the individual circumstances and where the infection occurred.  In the case of employees, if a worker can directly prove that they were put into harm’s way by an employer and therefore contracted a disease, they may to be covered under workers’ compensation policies but it will vary from state to state.  Some state laws limit how a policy can apply coverage to employees outside of the US and for employees that have excessive? travel.  Some states like Washington are ensuring that not only for those on the front line like healthcare workers are the ones that will be covered.  Time will tell how other states will respond but ultimately workers compensation insurance covers your employees who suffer injury or illness that has been contracted in the workplace or on the job.  This also extends injuries arising out of or in the course of employment.

Employment Practices Liability

We haven’t seen many claims come up on this yet, but we expect that there will likely be a rise in employment related claims due to workers compensation coverage not being sufficient and/or terminations from this pandemic.  With governors in some states encouraging employers to check the temperatures of their employees and telling them to ask their employees if they have the coronavirus leads to some potential questions around employment laws.  Though this may be encouraged by some state regulators it’s very possible we see additional claims including this in terminated employees’ complaints.  Here is a helpful resource for employers to protect their workers from COVID-19.

Here are some additional links that are helpful for business owners regarding the coronavirus (COVID-19):

EDD – California – Coronavirus

IRS – Coronavirus Tax Relief

US Small Business Administration – Disaster Assistance

California – Business Coronavirus Relief

CDC – Coronavirus Disease – Protect yourself

US Government Response to Coronavirus

Event Insurance 

Record number of trade shows and conferences are being cancelled daily.  The Olympics this year may also be cancelled due to this outbreak which would add to the billions of dollars in losses which include the interruption of important business deals and connections being made.  Some businesses may have a specialized event cancellation policy in force.  This coverage differs from policy to policy for sports events, entertainment, real estate trade shows or conferences and which carrier/policy form is used.  These polices may be written to specifically include coverage against cancellation for infectious diseases but what we are seeing is that most insurance companies have inserted endorsements excluding the coronavirus into this coverage.  If you have an event policy in place, be sure to check your policy to be sure there are no exclusions for pandemics and/or naming the coronavirus specifically.

Rent Protect Policies for Apartment Owners and Landlords

With most states now preventing landlords from evicting tenants, this is likely to lead to loss of rents from tenants not being able to pay their normal monthly rents.  Is this covered?  It’s unlikely this is covered under your standard business owner’s policy or apartment policy.  The good news is there are policies out there that do afford coverage for loss of rents, and the way the policy form reads, is silent as it relates to pandemics.  This is likely to change in the days to come but it’s still very possible, these policies will still be available.  If you ask your agent if he has heard of this coverage, more than likely he will say this coverage is not available or has not heard of it.  If this is the case, please call our team and we can help you, as we specialize in landlords and apartment owners and will advise all policies that will be best suited for your exposures and insurance needs.

What should businesses do in times of a disease outbreak?

  1. Take action!  Employers can start considering next steps to protect their employees.  Comply with OSHA’s rules and regulations.
  2. Develop new policies around sick leave and paid time off which should include:
    1. Sick Pay and Sick Days
    2. Employees Health Plans
    3. Build Confidence when communicating your policies so employees are not afraid
  3. Create a Business Continuity Plan
    1. Include? Supply Chain
    2. Disrupted Operations
    3. Identify Functions that can be replaced or transferred
    4. Appointing key staff
  4. Keep the workplace safe
    1. Follow the CDC guidelines
    2. Reduce risk of transmission
    3. Communicate to your staff, your tenants and/or clients the proactive steps you are taking that are within your control
      1. Link for recommendations on cleaning and disinfection
  5. Use Technology and over communicate
    1. Companies like Zoom, RingCentral and Whereby offer alternative technology solutions to make continuing business easy
    2. Create and develop a remote policy where you can
  6. Talk to an insurance agent that is well informed and is being proactive during this unprecedented time of COVID-19 to avoid any surprises while passively renewing your insurance policies.

A final piece of advice would be to play it smart. For the safety of your employees and the continuity of your business, being informed and proactive is the best way to go.

If you have additional questions about commercial insurance coverage and COVID-19, contact us at GS Insurance Solutions, Inc.  650-282-3104 or email us at

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