Insurance Coverage Claims in the Age of COVID-19: Don’t Wait

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world

We are in the middle of something that, for a lot of businesses, seems like Yeats’ “The Second Coming.” We have remote work orders, full closings of certain kinds of businesses, supply chain disruptions, vanishing customers. At worst, these are existential threats, and at best, pretty painful.

In the middle of the necessary and almost hourly triage that in 14 days has started to feel normal, it can be hard to think of longer-term strategies, but here’s an important one: insurance. Your insurance policies may not produce immediate cash, but now is not the time to ignore them, either.

We’re fielding questions on business insurance from our clients every day. Here’s what they’re asking.

1. What kind of insurance provisions might I have that can help?

Your property and casualty insurance policies might have provisions and endorsements that can help to cover your business losses. For example, you might have coverage for “business interruptions” or for losses caused by “orders of civil authorities.” Some policies will even contain endorsements specifically related to “communicable diseases.”

If you have losses caused by supply chain disruptions, or caused by the shutdown of a nearby property, you will want to see if your business has coverage for “contingent business interruption.” In addition, your directors and officers liability insurance policy can be evaluated for potential “crisis management” coverage. Your business also may have purchased “trade credit” insurance, which may cover losses when your customers fail to pay. The particular language of your company’s policy or policies is key.

2. Aren’t insurance companies just denying all the coverage anyway?

Our expectation and experience to date is that many insurance companies are taking a conservative approach to coronavirus-related claims, and issuing a lot of denials. After all, this virus has huge business disruption potential, and the claim volume and impact could be enormous. Carriers are going to push back, and there will undoubtedly be some fundamental disagreements relating to these policies that will eventually need to be resolved by the courts.

One significant disagreement will relate to whether “property damage” exists sufficient to trigger most business interruption coverage. Insurance policies are complex documents, and they contain many exclusions that must be evaluated. Policy language can vary significantly from one carrier to the next, and an experienced attorney can help you to understand whether your policy language supports a potential claim, and can help you to navigate whether and how to pursue a claim.

3. What types of losses might be covered?

The types of losses potentially covered will depend on your insurance contract language. Some policies cover loss of “business income” that results from having your operations shut down or interrupted. Other potential covered losses might include expenses in remediating a communicable disease, expenses associated with canceled events, crisis management expenses, and losses caused by supplier disruption or the disruption of a nearby business.

4. Why do I need to care about this right now?

Unfortunately, you can’t wait until the courts resolve all of this to take some action. Most policies have notice provisions, requiring insureds to provide prompt notice of potential claims. Failure to do so can impact coverage and recovery. Understanding your potential claims now can also put you in a better position to know what records to maintain, so that you are later able to support your claim with documentation.

While every situation will be unique, we’re recommending three simple steps that businesses should be taking right now to help them identify, pursue and support potential claims:

  1. Identify. Get your policies reviewed by an attorney ASAP for analysis of potential claims. Your broker can be a first stop for information and you should rely on him or her to provide your full policies, with all endorsements. Then get independent legal advice on whether you have potential claims.
  2. Pursue. Work with your counsel to prepare proper notices of potential claims, in order to meet any contractual prompt-notice requirements. These will help you to be in a better position to pursue your claims later, if you choose to do so.
  3. Support. Once you understand your company’s coverage, put a system in place to document and keep good records of all losses, so your business is in the best position possible to support its claims.