COVID-19 and Insurance: Navigating Your Insurance Coverage

As the impact of COVID-19 increases, our clients are facing an ever-growing set of concerns and challenges – from lost revenue to lost wages to third party claims. We have received many questions about potential insurance coverage for direct losses and potential claims. While no two businesses or policies are alike, key issues to consider across industries include the following:

Business interruption and contingent business interruption coverage:  This is top of mind for all clients. Business interruption coverage is typically part of commercial all-risk property insurance. For business interruption losses to be covered, there typically must first be physical damage to property – either the insured’s property (“business interruption”) or that of a supplier on which the insured relies (“contingent business interruption”). Whether contamination constitutes property damage depends on judicial decisions and the policy language, including whether and to what extent the policy excludes coverage for contamination due to viruses. Some policies may cover business interruption due to infectious disease even if there is no property damage.

Event cancellation:  Event cancellation policies cover lost revenue due to cancellation for a specified cause of loss. Coverage under the policies will depend not only on the cause of loss (and whether communicable disease is a covered cause of loss), but also whether cancellation was due to a government order.

Workers’ compensation:  Workers’ compensation coverage for employees presents unique questions in the context of a global pandemic. As a threshold matter, affected employees must show that their illness is work related. Those in the healthcare, hospitality and travel industries are the most likely to assert such claims.    

General liability:  Commercial General Liability (“CGL”) policies protect insureds against third-party claims for bodily injury resulting from exposure to harmful conditions. Individuals who became ill as a result of exposure to the virus at an insured’s operations may claim that they suffered bodily injury as a result of the insured’s failure to exercise reasonable care in guarding against or warning of the risk of exposure. The travel, hospitality and healthcare industries are particularly susceptible to such claims. In fact, a claim like this has already been asserted against a cruise line. 

CGL policies require that the bodily injury result from an occurrence, typically defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Whether exposure in any individual case is an accident will depend on the facts and state-law precedent. However, under many CGL policies, the allegations of injury (even if untrue) will trigger the insurer's defense obligation.

Maximizing Potential Insurance Coverage.  The landscape is changing rapidly, as are state government responses to potential insurance coverage issues. We will see both novel claims and novel coverage arguments. Keep careful records of losses, preserve information, mitigate your losses and, most importantly, timely notify your carrier in the event you have a claim. The attorneys in Honigman’s Insurance Recovery Practice Group are available to answer questions and provide guidance regarding insurance coverage matters arising from coronavirus and COVID-19. Please contact Paula Litt plitt@honigman.com or Sara Brundage sbrundage@honigman.com with any questions.