Insurance Related Issues and COVID-19
As the number of COVID-19 cases dramatically increase, questions around insurance coverage for event cancellations, business interruption, workers comp, and general liability have emerged. A key issue is: have we legally protected ourselves personally and commercially during these challenging times?
To begin with, we all have experienced events that have cancelled whether it was an airline flight or sports event. Even Disneyland closed. Since COVID-19, event cancellations have been a daily occurrence. Regardless of whether the event is a cancelled travel reservation or the March Madness basketball tournament, we must look to the language of the insurance policy to determine coverage such as viruses.
For many events, there is an option for the consumer to purchase insurance prior to the event occurring for those “just in case” life scenarios. The policy’s specific language typically contains exclusions. If you purchased, for example, trip insurance for travel (whether for a cruise, hotel, or airline) that you had hoped to go on and you are unable to now go, you must check the trip cancellation provisions. Question remains: does the cancellation insurance policy allow for pandemics like the one we are currently experiencing? Hint: It does if you purchased the insurance before the World Health Organization deemed the COVID-19 a pandemic. Otherwise, you knew of the risk and can not insure for things you know about.
There are all specialized policies that contain a list of covered causes, and coverage for coronavirus-related cancellations may be available if the list includes communicable diseases such as viruses, or even more specifically, pandemics. If an organizer of an event, for instance, cancels the event due to an official ban on large gatherings, they are more likely to be covered. However, most cancellation policies require the policyholder to mitigate or reduce one’s losses by making a good faith effort to reschedule the event before calling it off completely.
Sometimes the event may offer an alternate to minimize its loss such as a credit towards a future event. Airlines and hotels have special policies that may unfortunately be nonrefundable or may have “cancel for any reason” insurance. Again, whether you purchased insurance or are contemplating purchasing insurance, you must make sure you know the policy terms which most likely be redefined because of COVID-19 and changed in favor of the insurance underwriter. However, the government may provide the insurance industry with certain bailouts that may then allow for a broader definition of business interruption under the standard policies.
Business Interruption Insurance
For most business owners the most critical question that they are experiencing is how the COVID-19 pandemic will effect the sustainability of the business. Business interruption coverage is insurance that is supposed to cover a policyholder’s losses from having to shut down abruptly. There is also contingent business interruption which kicks in when losses result from the closure of a policyholder’s supplier.
For either type of insurance to apply, there must be a “direct physical loss” to the property—for business interruption insurance—the property of the policyholder and for contingent business interruption—the supplier’s property.
The major question is whether property that has been closed due to the coronavirus is still “habitable” or open is covered under a policy to enable the business policyholder to obtain coverage. Many policies will not kick in just because you are affected, and not the actual property itself. Again, mandates for us to stay at home does not necessarily mean that the business physical premises are “impaired”; and hence, insurers are most likely going to deny coverage.
Yet, if, unfortunately, a person with the COVID-19 virus has been inside the building where a business is located, coverage may be extended as there is a question as to whether a direct physical loss occurred since the entire building will be closed.
Even if that is the case, one must review the actual language within the business interruption policies. Some commercial property policies with business interruption insurance contain exclusions for pathogens, bacteria, viruses, and other diseases.
Further, general liability insurance carriers will also face lawsuits surrounding their level of care to protect customers from the coronavirus. A perfect case in point is the first of its kind suit by a South Florida couple against Princess Cruise Lines for failing to take precautions to prevent a coronavirus outbreak after passengers on a previous sailing had symptoms.
Key to such negligence claims is that companies deliberately ignored critical information that could have prevented the spread of the coronavirus. A secondary claim under the general liability coverage is for personal injury offenses of false detention and imprisonment as people were forced to stay aboard the ship in their cabins.
Yet, some insurers may invoke exclusions for claims of property or bodily injury deriving from a pollutant or contaminant.
Again, one must carefully read the language of the insurance policy to understand one’s coverage.
That being said, we are all in an unstable climate when any type of insurance as discussed in this blog will be challenged and the definition of coverage will inevitably change.
The most important is for us, as property and business owners, and individuals, to understand legal issues as we confront them, and to be strong as a community as we overcome this pandemic.
From the trenches,
Roy D. Oppenheim