Erie Chamber Blog
Tuesday March 17,  2020
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by: John Bloomstine
President and CEO
Insurance Management Company

You may be asking the question…is insurance coverage available under common business insurance policies for losses due to the coronavirus? We have been asked this question in many different ways but there are four common themes and we thought it would be helpful if we shared them with you. You will see that the answers are “maybe”, but highly doubtful.  Bear in mind that insurance policies differ widely, as do state laws and the risks applicable to individual businesses. 

Question:  Would we have insurance coverage for business interruption if either our employees fail to come to work, or our facilities become contaminated with the coronavirus and, as a result, we are forced to close, or one of our key suppliers or customers is so forced to close, resulting in an impact to our business?

The mere presence of the coronavirus virus is not likely to cause your property policy to respond to either property damage or business interruption losses.   Generally, most property policies require first that there be physical damage to tangible property to “trigger” the policy.     It is conceivable that the presence of the coronavirus could be deemed to be “physical damage”, but such a determination has not been made by the courts and will likely take years of litigation.  

Even if physical damage can be established, various exclusions might be triggered such as the pollution or mold exclusions.  Most property policies require that the damage results from a peril not otherwise excluded such as fire, wind, or earthquake.   Viruses, pandemics and contagious/infectious diseases are generally not covered due to the pollution or mold exclusions.   

Many of you purchase contingent business interruption coverage as part of your insurance program.   Contingent coverage responds if your business sustains a loss of income caused by either a supplier being unable to provide you with a product or a customer not being able to purchase your product.  However, much like a business interruption claim, contingent business interruption coverage generally requires direct physical loss to tangible property as well, caused by a covered peril, to either your supplier’s or customer’s property. 

Without physical damage from a covered peril, it will be a challenge to have either your business interruption or contingent business interruption insurance respond to coronavirus related losses. 


Question:  Would we have insurance coverage for business interruption if a government authority requires us to close, or curtail operations, or so requires one of our key suppliers or customers to close/curtail, resulting in an impact on our business?

Most business interruption insurance provides some level of coverage for business interruption losses caused by a civil authority (e.g. a governmental agency shutting you down).  However, this coverage also requires direct physical damage to tangible property.   For example, if your neighbor’s facility catches fire, and the fire department requires you to shut down because the fire is causing toxic fumes, this interruption could be covered.  

Merely because the government shuts your business down does not, in itself, cause the business interruption insurance to respond. 


Question:  Would we have insurance coverage for potential liability if a visitor claims to have been infected with the coronavirus at one of our facilities?

A commercial General Liability policy provides coverage when the insured is legally liable, and the loss was not intended.   While every business has the obligation to maintain safe premises, including reasonable hygiene, to protect against the injury to visitors, proving legal liability related to a visitor's contraction of the virus would require a claimant to prove that your company failed to take reasonable measures to protect the public. 

However, it is important to note that two coverage exclusions would likely come into play:

  • Coverage does not apply to bodily injury resulting from a “pollutant on-premises”.   The definition of a pollutant is extremely broad and could well include a virus.  

  • Mold exclusions are also common, and a virus is often included in the definition of mold.

 Maintaining safe and healthy premises is paramount to managing this risk.

 

Question:  If any of our workers can prove that they contracted the coronavirus at work, is their disease covered by workers' compensation?

Generally, there are two tests:

  1. The illness or disease must be occupational, “meaning that it arose out of and was in the course and scope of the employment”; and
  2. The illness or disease must arise out of or be caused by conditions peculiar to the work (e.g. black lung disease in coal mining; healthcare workers’ contacting hepatitis)            

It should be noted that workplaces that have not historically had any increased risk of exposure to infectious diseases could be deemed to be at an increased risk going forward as the result of government mandates that workers continue to show up despite the coronavirus risk.   Grocery stores could be such an example.    Accordingly, a change in the risk profile of certain workplaces could result in workers' compensation claims being accepted for infected workers in those workplaces.  

This Q&A merely serves as an outline to some of the key challenges that exist for businesses regarding the coronavirus. Contact your insurance business agent to review your policy and understand the details as it relates to the potential impact.  


Insurance Management Company is a third-generation family (The Bloomstines) owned and operated insurance agency in Erie, PA that services the property, liability, cyber risk and workers’ compensation needs of currently 125 commercial, industrial and institutional clients that have operations in 26 states and 31 countries.  They can be reached at www.imcerie.com or by emailing john.bloomstine@imcerie.com.

TAGS:
  • coronavirus
  • business insurance

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