Does your insurance policy cover you for COVID-19 losses?

By Jennifer Wasson

Jennifer Wasson

The COVID-19 crisis raises a multitude of issues for businesses facing significant losses, including whether they can rely on their insurance for help.  “Novel COVID-19” is also novel for the insurance industry, as carriers and policyholders seek to determine whether, and to what extent, various types of coverage will apply to virus-related claims.  While the answers are far from clear yet, here are five things your business can do to maximize the potential for coverage:

1. Review your entire insurance program. It’s important to take stock of all the coverage you have.  The following types of insurance may provide coverage for COVID-19-related claims:

• Property Insurance: Many property policies cover business interruption losses such as lost profits and extra expenses that arise from disruptions in operations.  Some property policies also cover “contingent” business interruption losses, another type of coverage that applies to disruptions to a business’s supply chain.  Business interruption insurance certainly sounds promising, given the lost profits and shutdowns that many businesses currently are facing.  But an interruption to routine business is not enough; property policies typically require physical damage to property to trigger coverage for a claim.  Policyholders may be able to demonstrate this physical damage if their premises are contaminated due to the presence of infected workers. 
• Event Cancellation Insurance: These policies cover lost revenue and expenses associated with the inability to hold an insured event at its scheduled time.  Some policies provide coverage even if the event is merely postponed.  Voluntary cancellations are not covered; cancellations due to government directives, such as an emergency declaration, likely are. 
• Workers’ Compensation Insurance: If an employee contracted COVID-19 at work, or in the course of his or her employment off business premises, workers’ compensation coverage may be available for lost wages or medical expenses.  Given the global reach of COVID-19, and the fact that it is highly contagious, it may be difficult to prove that a person was infected at work, or as a direct result of his or her work.  Workers whose jobs involve fighting the spread of the virus, or who deal directly with large populations, may have the best argument that COVID-19 is an occupational disease giving rise to compensable claims.
• Commercial General Liability (“CGL”) Insurance: CGL policies cover claims for bodily injury, property damage, and personal and advertising injury brought by third parties.  These types of claims are not likely to be the most prevalent risks immediately facing businesses in response to COVID-19.  If your business is sued by a third party for liability relating to the virus, for example, for negligence in failing to protect others from infection, this coverage could apply. 
• Business Travel Insurance: If an employee contracted the virus during travel for work, this insurance may provide coverage for lost wages and medical expenses, although some policies exclude claims caused by “epidemics” or “pandemics.”  If the policy does not contain this type of exclusion, a key issue will be demonstrating that the employee’s infection was caused by or during his or her travel.  Some travel policies will also cover expenses relating to trip cancellation and return home, if the travel was booked prior to travel restrictions or knowledge of the epidemic.  It’s also a good idea to check for travel coverage from sources outside your traditional policy program, such as the company’s credit card. 
• Cyber Insurance: These policies often provide coverage for losses sustained as a result of a cyberattack, as well as third party claims by customers or vendors for cyber breaches.  This coverage may be implicated if a data breach or other cyberattack arises as a result of employees working remotely due to the COVID-19 outbreak. 

2. Read Your Policies. Yes, it might be tedious, but be sure to read your policies from cover to cover.  While policies often employ “standard” language and contain certain common provisions, each carrier has its own forms and may include conditions unique to your business and risks.  Focus on the definitions of key terms, the requirements for notifying the insurer of a claim, and the exclusions.  Some policies expressly exclude claims arising from bacteria and viruses, communicable diseases, or infections.  Other definitions also may be relevant, such as the definition of “contaminant” in property policy (which may or may not cover COVID-19) and the definition of “computer system” in a cyber policy (which may or may not cover employees working from home).  
3. Use your broker as a resource. Your broker is an important player during policy negotiation and placement, but can also be a valuable resource during the claims process.   Brokers often have direct access to insurer decisionmakers, experience in understanding the insurance at issue, and the ability to assist in giving proper notice and fulfilling any preconditions to coverage that may apply.
4. Give notice of a claim as soon as reasonably possible. Many policies allow notice of a claim to be given “as soon as practicable,” but some have specific timing requirements that can result in denial of a claim if not followed.  Know what your insurer requires and consider giving notice even if you are unsure whether your claim will be covered.
5. Do what you can to mitigate. Given the uncertainty surrounding insurance coverage for COVID-19-related claims, businesses should be proactive in responding to their potential risks.  For example, to the extent possible, employers should minimize the risks to their employees by limiting nonessential travel and exercising flexibility with respect to sick leave for workers feeling ill.  Businesses who can institute teleworking policies should provide employees with a secure way to remotely access the system and training on best practices for protecting sensitive data.  Taking steps to mitigate harm can often be a precondition to coverage, and makes good business sense in light of the unsettled insurance landscape surrounding COVID-19.

Jennifer Wasson is a partner at Potter Anderson and head of the Insurance Recovery practice.