We've been receiving questions from our insureds in regards to whether or not there is coverage for COVID-19 related shut downs, etc.
With that in mind, I wanted to take some time to focus on this, specifically if you own a restaurant or any other business that has been forced to shut down or modify offerings to the public.
Business Income coverage:
Whether it be a full shutdown of business, a partial suspension of operations or an alteration in business operations that remain open, Business Income coverage must be due to a suspension caused by direct physical loss of or damage to covered property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss. Extra Expense coverage also requires the same coverage triggers. In general, a quarantine of any size, or brought about by a governmental action without a Covered Cause of Loss, would likely not trigger Business Income or Extra Expense coverages under our policies.
Civil Authority coverage:
Civil Authority additional coverage pays for actual loss of Business Income and Extra Expense caused by an action of civil authority that prohibits access to the described premises when a Covered Cause of Loss causes damage to property other than property at the described premises. A widespread governmental imposed shutdown due to COVID-19 (coronavirus) would likely not trigger the additional coverage of Civil Authority.
This additional coverage for Contamination will pay for costs to clean and sanitize the premise, if the insured’s operations are suspended due to “contamination.” A governmental agency, such as a Health Department, must close a specific business because of the discovery or suspicion of food contamination. Because COVID-19 is spread through human contact and is not seen as a foodborne illness, it would be unlikely to trigger this coverage.
Product Spoilage coverage:
Product Spoilage requires a specific and unique Spoilage Covered Cause of Loss. These are a change in temperature or humidity due to a mechanical breakdown or failure of equipment, or contamination by a refrigerant or power outage. Any alleged COVID-19 (coronavirus) exposures or spoilage from the extended shelf life of a product is not a Spoilage Covered Cause of Loss.
THIRD-PARTY LIABILITY AND WORKERS COMPENSATION
General liability coverage applies to bodily injury caused by an occurrence. COVID-19 illness allegations presented by third-party claimants would be considered on an individual basis. An important element to proving liability would be evidence that an illness occurred due to exposure at a particular business, and that the business was negligent in allowing the exposure. Both of these would be very difficult to prove in a community-spreading viral outbreak. Allegations of bodily injury by third parties should always be referred to us for review, but it’s unlikely negligence could be substantiated.
The burden to prove that Workers Compensation benefits apply for COVID-19 would be very difficult. Disease claims have specific elements outlined within the Workers Compensation statute necessary to find a claim compensable. These elements would include, but not be limited to, the following, as each state may have additional tests to be met. First a worker must show their job is at a greater risk to exposure than the general public. A worker must also show they contracted COVID-19 while in the course of their employment, and it must arise out of their employment. Both arising-out-of and in-the-course-of tests are required to find compensability. Once again, this is difficult to establish in a community-spreading viral outbreak, but all purported claims should be referred to us for review.
This blog post is to be used to guide businesses through understanding their business' coverage. Decisions will be dependent on your specific carrier. I strongly encourage businesses and individuals to reference the precise wording regarding your coverage and please feel free to reach out to me with any specific questions.