Responding to the Coronavirus
As news headlines about the coronavirus (COVID-19) disease continue to increase, so has concern over its potential to effect employee welfare, disrupt global supply chains and slow business operations. RPS’s experts are here to support you in the development and implementation of risk management policies and procedures during a pandemic.
In case of an increased threat in the U.S., the CDC is operationalizing its protection and preparedness plans in communities across the country. As a trusted advisor to your clients, you too should take added measures to review key insurance policies and support business continuity plans.
Insurance Policies That May Respond
While specific policies for business loss due to a pandemic are uncommon, check with your local RPS broker immediately to confirm what key coverages will be provided in a specific event.
Compensability for workers compensation will truly come down to whether or not the disease/illness is considered occupational. In order for it to be compensable, the disease would have to be contracted during the course of employment and due to conditions specific to the employees work. Various statutory intricacies will also come into play depending the particular state where the business operates. For example, healthcare workers, who find themselves interacting with ill people, are more likely to have workers’ compensation compensability.
General liability policies provide coverage for injury to persons (other than employees) and damage to property of a third party for which the policyholder is legally liable. Liability for such injury or damage involving COVID-19 or a similar health emergency will arise chiefly out of a failure to protect others and their property against exposure to infection. Many general liability policies have exclusions that could preclude coverage for this kind of infection. Careful examination of the policy’s coverage terms, conditions and exclusions will be necessary to determine if such a limitation applies to you. Additionally, Umbrella and/or Excess Liability policies may contain a communicable disease exclusion.
Standard property policies require that physical loss or damage to covered property, by an insured peril, occur for coverage to trigger. Contamination of property at an insured’s location may constitute physical loss or damage, but policy exclusions for pathogenic organisms, viruses and disease or illness causing agents may restrict or exclude coverage. For business interruption coverage to trigger, the loss or damage must generally occur on the insured’s premise. Business interruption extensions such as contingent business income, ingress/egress, loss of attraction and denial of access are subject to the same coverage parameters outlined above, although not necessarily occurring at an insured location.
Limited available coverage for communicable or infectious disease is offered on some property forms. This coverage is likely sub-limited and narrow in its coverage scope, especially outside of an insured location. Covered costs include cleanup, removal and disposal of contaminated property. Any business interruption extension will likely not apply to locations that are not owned or operated by the insured.
Environmental Liability Insurance
In addition to the Property policy, consideration should be given to the Environmental Liability policy.
Currently environmental liability policy forms do not identify COVID-19 as a pollutant and do not specifically exclude it by name. Some policies, however, do contain communicable disease exclusions that preclude coverage when a disease is transmitted by personal contact. However, they do not exclude transmission of the disease caused by the environment within the insured site.
If a “Pollution Event” has taken place, or a “Pollution Condition” exists, coverage may apply in cases of negligence or strict liability. In turn negligence can be the failure to prevent the spread of the disease on the premises, or the coverage may be triggered by strict liability as the result of a “Pollution Event” that has taken place, or a “Pollution Condition” under environmental laws.
Management Liability insurance is being evaluated on a case-by-case basis as the COVID-19 threat is monitored. Many companies have made disclosures that COVID-19 has caused disruptions in production, staffing and sales. Accordingly, we may begin seeing COVID-19-related D&O claims, specifically securities class actions by shareholders to the extent that these disclosures cause a stock drop*. Such disclosures may also bring about derivative action litigation, whereby plaintiff shareholders sue on behalf of the company against the directors and officers alleging that executive mismanagement of the situation cost the company significant revenues.
It remains to be seen whether employment practices liability policies are impacted. Employees impacted by quarantine and unable to work may be seeking accommodations or leaves of absence. It is unclear whether quarantine gives rise to obligations under FMLA or ADA.
*This does not apply to nonprofit organizations.
Cyber insurance policies typically include an element of Business Interruption that can also include business income loss sustained by dependent businesses that the insured is reliant upon to host their systems, software, data, etc. (contingent or dependent business interruption). However, we do not anticipate cyber policies covering business interruption losses stemming from COVID-19. Often times, these insuring agreements require a security breach as a trigger for loss. And while cyber coverage has expanded in this area, with triggers expanding in some forms to include “system failure” or “network disruption” – essentially unplanned outages of the insured’s network – there are exclusions in the policies that will most likely prohibit coverage relative to pandemic, as this was not the intent of cyber insurance coverage. Some cyber insurance policies broaden the business income trigger to include “voluntary shutdown” of a system as well. While insureds may indeed shut down their systems on a voluntary basis as they navigate the COVID-19 pandemic, this coverage extension will require that the intentional shutdown of a system be done in an effort to mitigate further damage as the result of a covered security breach. While we generally expect the typical bodily injury and governmental action exclusions, and security breach triggers found in cyber policies to preclude business interruption coverage relative to pandemic, it is important to examine the policy and discuss with your RPS product expert. Coverage applicability will be determined on a case by case basis by insurers.
Errors & Omissions:
Professional liability policies respond to a failure to perform specific services that have been agreed to via a contract with the insureds customers. Many contracts have a force majeure clause built in to protect them in situations like this. Many professionals have the ability to work remotely but that could have an impact on quality control and oversight of the finished product. It is important for companies to implement a review process that can be tracked that follows the corporations internal QC as an effective means of risk management.
Travel Accident Policy
The United States State Department has increased the level of risk for travel to certain countries and continues to update its advisories as they monitor the threat. Some countries have instituted preventive measures for travelers that want to visit their countries, are requiring medical clearance before the traveler is permitted to enter the country or are insinuating other measures, including a health quarantine.
As of early February, carriers and underwriters are no longer including the threat of coronavirus as a covered trigger for evacuation, cancellation and interruption benefits. Even the “cancel-for-any-reason” policies available in the market have excluded the coronavirus from their covered triggers. These policies will only cover a traveler who actually contracts the virus. Therefore, it is critical that you discuss this with your clients to determine the potential threat before your clients decide to travel.
24/7 travel assistance services are still available for travelers around globe to assist in booking passage home at the cost of the traveler.
What this means for your clients
This is an evolving risk that RPS continues to monitor through the CDC and WHO. Please reach out to your local RPS specialists with any questions or contact our Customer Care team at 866-595-8413 or firstname.lastname@example.org.