Business owners around the country are justifiably concerned about the threat from the coronavirus pandemic (COVID-19)
Many business owners fear for the health and safety of their families and employees. They also have many questions about commercial insurance, and how (or if) coverage extends to circumstances relating to COVID-19.
We’re offering this Q&A to help clear up some of the confusion.
NOTE: Every state has different regulations, and every policy is different. Consult your policy and be sure to ask your insurance agent if you have any doubts.
Subject: Lost revenue due to business shutdown
Perhaps the most frequently asked question concerns whether business insurance covers lost revenue due to a shutdown.
1. If my business must shut down, will my insurance cover the lost revenue?
2. If I experience supply chain issues that affect my ability to conduct business, will insurance cover lost revenue?
3. Does business interruption/business income insurance apply when it comes to coronavirus mandatory or encouraged shutdowns?
Unfortunately, business interruption insurance usually only applies when the work stoppage is the result of physical damage or loss of property. Most insurance policies (and previous case law) say that a work stoppage because of a disease such as COVID-19 does not constitute direct physical loss or damage.
Three types of business insurance
1. Business Income Coverage: This coverage is triggered when there is a necessary suspension of operations due to direct physical loss or damage of property related to “Covered Cause of Loss.”
2. Civil authority (part of business income coverage): Coverage is triggered if the action is in response to dangerous physical conditions resulting from the property damage or to enable civil authorities to have access to damaged property.
3. Dependent properties business income (also called “continent” coverage): This coverage applies when the damage is to a supplier’s property. It is meant to help if a business that you depend on for supplies suffers physical damage, and they are unable to deliver products.
Even if you could get past the “physical damage or loss to property” clause, there may still be exclusions, including:
• Loss due to virus or bacteria
• Loss due to pollution
That being said, you never know what your insurance carrier will decide. It’s always best to make a claim and let the carrier have the final say. Also, you never know when there will be changes or new laws enacted which could benefit you.
Subject: Cancellation of business conferences
Business conference cancellations are happening around the country. Many business owners have questions about reimbursement coverage.
Can I be reimbursed for business-related conference expenses that I paid for an employee who was scheduled to attend?
Some policies do have coverage for cancellation relating to a “natural catastrophe” or “communicable disease.”
There are requirements, however:
1. The insured employee must have registered for the conference at least 30 days before the cancellation.
2. Local, state, or federal board of health or other governmental bodies must have ordered the cancellation.
3. There are limits to coverage.
Subject: Reliability if an employee gets sick
There are also questions relating to reliability if an employee contracts the coronavirus while at work or during travel.
1. If I require an employee to work or travel and they get sick, is he/she entitled to workers’ compensation?
2. Will business insurance cover workers’ compensation expenses related to COVID-19?
3. Will I be held liable if an employee gets sick on the job?
This is harder to answer as workers’ comp regulations vary from state-to-state. Workers’ compensation generally applies to accidents, injuries, and occupational diseases. There is some question as to whether COVID-19 qualifies as an “occupational” disease.
Ask yourself some questions about the incident or claim.
1. Did the illness arise out of or in the scope of employment? In other words, was the employee exposed because of something he/she was required to do for work?
2. Did the illness arise from conditions peculiar to the work? In other words, did the working conditions increase exposure?
This is a complicated subject, so it’s best to let your insurance carrier have the final say.
Subject: Other liability questions
Another concern is liability claims relating to negligence on the owner’s part.
If a customer or guest at an event hosted by my company becomes infected and claims negligence, would business insurance cover costs?
The claims “may” be covered under General Liability (Coverage A), which covers bodily injury and property damage.
Subject: Liability and coverage of employees working from home
Many businesses are scrambling to give employees the ability to work from home. While necessary, this situation does present problems relating to cyber crime, lost or damaged property, and work-related injuries sustained at home.
If an employee works on a home computer that is not secured or protected by the office’s firewall, are cyber incidents covered by a cyber insurance policy?
First, you must do all you can to ensure that proper security measures are in place for home computers, including:
• Strong password
• Secure internet connection
• Anti-virus software
• Continued practices to protect sensitive data
Check your policy as cyber forms vary widely among states and carriers, but there are questions to ask yourself:
1. Is the employee’s computer part of the covered system?
2. Could exclusions apply if the employee’s system doesn’t have the required protection?
3. Could coverage be compromised if an employee’s system doesn’t have the same level of protection you claimed on the cyber insurance application?
If equipment is sent home and it gets damaged or stolen, will business insurance cover the loss?
What if equipment is damaged or stolen during transit?
Most commercial insurance provides little coverage for property that is “off-premises.” Check your policy to see how much coverage is provided. Also, be sure to check how much coverage is offered if the equipment is damaged or stolen while in transit.
Does the employee’s homeowners’ policy cover damage to office equipment?
A typical homeowner’s policy only allows around $2,500 for lost/damaged property. It’s best to get your business coverage extended to equipment that will be used off-premises.
If an employee is injured at home, will that be covered under workers’ comp?
There are a few questions that must be answered about the incident.
1. Was the employee injured doing something related to work?
2. Did the action fall under the “scope of employment”?
If a client is injured while meeting an employee at his/her home, is that covered by business insurance or the employee’s homeowner’s policy?
As a rule, a general liability policy is not location-specific, so the incident should be covered. However, be aware of exclusions in your policy. Some newer policies (2017 and beyond) do contain exclusions related to “bodily injury” and “property damage” that occurs off-premises.
Be safe, be smart, and stay strong
There is a lot of uncerta inty because of COVID-19. We are all in this together. We hope this Q&A helps answer some of your questions.
If you’re looking for the latest health alerts and information about the coronavirus, consult the Centers for Disease Control (CDC) website.
Be sure to pay attention to CDC guidelines specifically for business owners.
We understand there is a lot of confusion right now, so we are here to answer any questions about your coverage. Please contact us and let us know how we can help.