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Q&A on Business Insurance & COVID-19

Tuesday, March 17, 2020

Operations slowing, closures and lost sales due to COVID-19 fears are leading to growing questions regarding insurance coverage such as business interruption coverage and how it applies to the recent outbreak. 

Below, we have recapped coverage observations based on information presently available.  Information may change as local and federal agencies weigh different response measures.  

Is there business income coverage if a governmental authority (civil authority) requires businesses to close?

The standard ISO insuring agreement states that Business Income losses must be caused by direct physical loss or damage to the property resulting from a Covered Cause of Loss.  A closer look at the Causes of Loss finds that damage requires physical harm generally evidence by changes in the physical characteristics that require repair, and that the presence of a virus on a surface or in the air does not change the physical characteristics such that repair is required.   Contagious diseases like COVID-19 would not count as a covered loss. This requirement applies to business income-dependent property losses (supply chain) and civil authority losses covered by business income policies. [1]

Will I be liable if others catch coronavirus at my business?

 When it comes to these concerns, it’s important to take the following insurance considerations into account:

  • General liability insurance—General liability insurance, sometimes referred to as commercial liability insurance, protects your business from financial loss should you be liable for property damage or personal and advertising injury caused by your services, business operations, or employees. Liability claims for such injury or damage involving COVID-19 or a similar health emergency will allege 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.

Does Workers’ Compensation cover employees that get infected with COVID-19 at work?

While a number of workers’ compensation considerations come into play, when it comes to workplace illnesses, most state statues only pay out benefits if the disease in question is occupational in nature. That is to say that communicable and contagious diseases are generally excluded from workers’ compensation policies.

However, coverage may be triggered in some circumstances – those related to if the illness arose due to or in the course of the worker’s employment.

Two tests must be satisfied before any illness or disease, including the Coronavirus, qualifies as occupational and thus compensable under workers’ compensation:

  1. The illness or disease must be occupational, meaning that it arose out of and was in the course and scope of the employment; and
  2. The illness or disease must arise out of or be caused by conditions peculiar to the work.

The simplest test toward determining whether an injury arises out of and in the course and scope of employment” is to ask: Was the employee benefiting the employer when exposed to the illness or disease? Be warned, this test is subject to the interpretations and intricacies of various state laws.[2]

Qualifying as occupational is the relatively low hurdle. The bigger hurdle is whether the illness or disease is peculiar to the work. If the illness or disease is not peculiar to the work, it is not occupational and thus not compensable under workers’ compensation. An illness or disease is peculiar to the work when such a disease is found almost exclusively to workers in a certain field or there is increased exposure to the illness or disease because of the employee’s working conditions.

Should I file a claim?

As with any loss, policy terms and the facts surrounding each individual scenario are critically important to the insurance company’s determination of a claim.  We encourage clients to reach out to us with any questions regarding policy exclusions and endorsements and to file any claims directly with your insurance company if you feel it is appropriate. 

Our goal is to advocate for our clients and get the most favorable response available under the applicable policies. Please keep in mind, the coronavirus is a very unique situation.  We anticipate significant losses, it is critical that clients are collecting necessary documentation of losses now. There will likely be future litigation that will challenge policy defenses presented by insurers. Please reach out to us with questions.





Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.

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