Does Your Business Have Insurance Coverage for COVID-19 Related Issues?
The COVID-19 pandemic has brought with it a new reality of social distancing and working from home for many employees. For businesses, the response to the pandemic raises any number of issues, ranging from human resources to information technology to business continuity.
Among these many concerns is whether or not businesses may have insurance to cover the financial losses that will potentially be caused by the slow down resulting from the pandemic. The answer, of course, depends upon the specifics of the language of the policies the business has.
In the broad context, the likeliest source of coverage for COVID-19 related losses will be found under business interruption (or business income) insurance. If purchased, this first-party coverage is typically set forth under the Commercial Property section of a business’s policy and, in general, provides coverage for “direct physical loss of or damage to property.” Also at issue is the impact of whether business income lost as a result of “civil authority” mandating closure will be covered.
From the perspective of whether insurance coverage exists, the key question moving forward will be whether courts construe the coronavirus to satisfy this threshold requirement for triggering coverage. As always, there are arguments to be made on both sides of the equation. On the side of finding coverage, policyholders are sure to argue that the existence of the virus on surfaces on and off of the business’s premises constitutes a “physical loss” to property. To advance this argument, the insureds will likely look to existing bodies of case law finding coverage in cases from the previous generation’s mesothelioma litigation and perhaps analogous case law involving mold or other bacterial infestations.
On the flip side, insurers are likely to counter with the argument that affected properties do not suffer “direct physical loss” as a result of a temporary conditions, such as a virus, that does not permanently alter the structure of the building. Moreover, many policies include a specific exclusion for “Loss Due To Virus Or Bacteria”, which the insurance industry began adding on to policies as early as 2006.
As noted at the outset of this piece, in order to evaluate what coverage a business has – or might have, close scrutiny of the language of the insurance policy forms issued to that particular business. Litigation over the many issues presented is a near-certainty and, in fact, the first COVID-19 related coverage lawsuit was already filed earlier this week in a Louisiana State court by a restaurant seeking reimbursement from its insurer for losses suffered by the business as a result of the public gatherings limitations imposed by the civil authorities in New Orleans. The issue will be further informed by potential action by elected officials, as the New Jersey State Assembly recently introduced a bill designed to require insurance companies to pay business interruption claims related to coronavirus claims. While the fate of that particular piece of proposed legislation is in doubt, other efforts to create similar results may be forthcoming.
We at Hill Wallack LLP are watching and tracking the many developing legal issues surrounding the COVID-19 pandemic and are prepared to discuss issues you or your business might have. As the effect of these issues are sure to continue to expand to impact more businesses, we stand ready to help and advise individuals and businesses with respect to their insurance coverage and contractual needs.
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