Pandemic Business Insurance
According to Statista.com, pre-coronavirus pandemic calculations indicate that “most major economies will lose at least 2.4 percent of the value their gross domestic product (GDP) over 2020.” To put this number in perspective, they say, it could result in “almost 3.5 trillion U.S. dollars in lost economic output.”
Zooming in, this number represents millions of small, medium, and large companies who could be forced to shut their doors without assistance. And in many instances, this help primarily comes from their business insurance policies.
Given the scenario faced by much of the modern world, what might you expect? Since this form of insurance protects against a wide variety of scenarios, we’ll take a closer look at some of the most common.
Business Interruption Insurance
Suppose your business is forced to close due to a covered peril. In that case, business interruption insurance provides coverage for essentials like lost income, mortgage or lease payments, taxes, employee payroll, and more.
However, as the New York Times‘ Mary Williams Walsh outlined in August of this year, many business interruption insurance policies exclude epidemics caused by “virus, bacterium, illness or disease.”
Furthermore, most of the perils listed in these contracts require that physical damage occurs to the business’s property, which isn’t the case when a restaurant (for example) has to cease operations because of city, county, or state mandates they must close their doors because of a viral or bacterial pandemic.
The consequence is that many insurance carriers have denied policyholders’ business interruption claims related to the coronavirus pandemic. As a result, the N.Y. Times article indicates that “more than 400 business interruption lawsuits have been filed, according to insurance lawyers.” We’ll have to wait and see how this pans out and sets precedence within the insurance industry.
In the meantime, some insurance companies, such as Chubb and AIG, have drawn up a plan for a Pandemic Business Interruption Program, which posits a public-private partnership between insurance carriers and the U.S. government. Although, as of this article’s writing, pandemic-related coverage under business interruption insurance largely remains a grey area.
Workers’ Compensation Insurance
The U.S. Department of Labor indicates, “All federal employees who develop COVID-19 while in the performance of their federal duties are entitled to workers’ compensation coverage pursuant to the Federal Employees’ Compensation Act (FECA).”
But what happens if you’re not a federal employee? Short story: As with most other aspects of the coronavirus pandemic, coverage remains a grey area and mostly dependent on the state in which damages occur.
Related: Workers’ Compensation Insurance 101
In a nutshell, though, the Washington Post explains that if you’re infected with coronavirus or any other virus, bacteria, or pathogen, it’s difficult to prove that transmission occurred at your office or in the course of your work-related duties. Consequently, it’s often challenging to obtain coverage under workers’ compensation insurance.
Directors and Officers Insurance
Directors and officers coverage can vary significantly between policies. Still, according to the Jones Day Law Firm, there exist various scenarios where D&O insurance might respond to coronavirus-related claims. These include:
- “Direct and derivative securities claims and class actions”
- “Antitrust lawsuits alleging price-gouging or price-fixing”
- “Regulatory investigations in connection with SEC reporting and disclosure requirements”
- Bankruptcy claims from creditors, trustees, shareholders, etc.
Errors and Omissions Insurance
Just like any other form of insurance, whether or not a claim is covered depends on the circumstances surrounding each one, as well as the specific coverages provided under each relevant policy.
With this said, how the insurance industry responds to E&O-related claims remains in a ‘wait-and-see’ status, overall.
The Bottom Line About Business Insurance Coverage for Pandemics Like Coronavirus
The bottom line is that the coronavirus pandemic has negatively impacted hundreds of thousands of businesses in the United States. And with a mostly uncertain future, it’s possible that hundreds of thousands have yet to be affected.
However, so far, many companies have also been disappointed to learn that their business insurance policies fall short when it comes to pandemics of any kind, whether related to the coronavirus, or any other type of virus, bacteria, or pathogen.
What can you expect for your business and your industry? The professionals at IHS Insurance Group will stay on top of the situation and report breaking information as it’s presented!
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