Does your policy cover illness-related closures?
The World Health Organization has reported that Coronavirus has infected more than 80,000 individuals worldwide, with deaths over 3,000. Currently, in the United States, there are 86 confirmed cases of COVID-19*. Fear of a potential pandemic has led many countries to cancel flights from highly effected countries, institute quarantine procedures, and close borders. Many organizations have taken steps to eliminate any unnecessary business travel overseas. In light of these unusual circumstances, Assurance advises companies to review their insurance policies, specifically those with Business Interruption and Commercial General Liability coverage.
You may not realize that standard un-endorsed Business Interruption policies will not extend to business interruption caused by a bacteria or virus. More recently, in response to the SARS and other outbreaks, many insurers added specific exclusions for bacterial or viral outbreaks in standard business-interruption policies. As an example, AIG paid out $16 million alone to one of its insureds, Mandarin Oriental International, who claimed business interruption from the SARS epidemic. In response, insurers learned a costly lesson from the SARS outbreak and viewed economic losses from epidemics as infeasible to the industry and began to exclude coverage.
However, there may be endorsements available that do include specific language that extends coverage to “infectious disease”. This clause is referred to as the ID Extension. This ID extension may be triggered in the case of a loss related to the closure of your business due to an “order of a competent public authority as the direct and sole result of any infectious or human contagious disease.” To clarify, a competent public authority is a government entity that has ordered the interruption of one’s business operations.
In order to submit a claim as part of this the insurance process, know that you will need government documentation of such an order. In addition, even in the case of an order, some policies will only respond to the claim IF the virus is present at the business. This means that simply closing your business as a precautionary measure (without the virus being present) may not be covered by your insurance policy. This does not take into account any losses related to supply chain or contingent business interruption.
Should a pandemic outbreak occur, the Commercial General and some Professional Liability policies may provide a legal defense in case of a claim. It is important for the employer/company to clearly demonstrate that reasonable safeguards (duty to protect) have been taken. If the insurance company does accept responsibility for the claim, the insurer will be responsible for “bodily injury”, “personal injury”, and/or “property damage”. Should an organization fail to protect people from infectious disease through negligence or is found liable, insurance may not cover the claim.
If you happen to have a claim that may be related or caused by the coronavirus, please contact your claims advocate at Assurance for assistance with policy review and coverage questions.
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