Panelists Tom Sharkey, Tom Kovatch, Craig Sutherland, Peter Rosky, and Mike LaForge joined moderator Brad Muniz on a webinar entitled, “Facing the Unimaginable: Are You Insured for Business Disruption During a Pandemic?” addressing the shifting insurance environment in light of the impact of the coronavirus pandemic.

  • As was expected, at the top of the list of concerns for most business owners and their advisors who were attending this webinar was the varying opinions on whether or not a loss in business income caused by COVID-19 will be covered by insurance, which is most often triggered when a covered risk causes direct physical loss or damage to the policyholder’s premises resulting in the need to shut down business operations. It was discussed that at this time, almost all carriers have taken the position that the Coronavirus does not cause direct physical damage and therefore is not covered.

The large carriers such a Chubb and Travelers adhere to the premise that the suspension of operations must be caused by direct damage. As such, the concern is that most policies will continue to exclude coverage based on the disruption caused by COVID-19.

Despite the insurers overall position each policy must be reviewed on an individual basis as your policy may not contain a specific virus or pandemic exclusion, further there is a number of defining case law for which “Direct Physical Loss” has been challenged successfully . Circumstances are different for each claim, but at minimum put your insurer on notice and carefully review or seek professional assistance in reviewing your particular policy to understand your best way forward.

And yet, as is true for every aspect of the pandemic, the landscape continues to change and evolve very rapidly.  With that in mind, many eyes will be on the law suit brought against Chubb by a Summit, NJ restaurant regarding the civil authority and virus exclusion clause in their insurance policy.  The decision will be interesting, especially at a time when legislators across the country are talking about mandating insurance companies to cover business disruption, although no law has been approved or passed.

Results of the poll question asking “Have you submitted a claim?” 19% of the respondents said YES; 45% said NOT YET; 23% said CONSIDERING IT; and 13% replied DON’T HAVE TO.

Based on the recent mandate from the California Insurance Commissioner, carriers are being told they must pursue a thorough and fair investigation of every claim. This mandate may make it to New Jersey – so be sure to file your claim on a timely basis, whether your insurance policy has a pandemic exclusionary clause or not. 

The loss of income may result from revenue lost, a rise in expenses, supply chain disruption or even an inability to gain access to your business, so keep clear records and detailed documents to substantiate your position on business disruption. Document everything!

In the poll question asking, “What is the % of reduction in your sales?” 30% replied that reduction was 10%; 30% said the reduction was 25%; 38% said the sales reduction was 50% and 2% actually saw an increase in sales.

  • A second important point related to insurance was the Executive Order issued by Governor Murphy that the insured now have a 90 day grace period for paying their premium. Importantly, during that time, carriers cannot cancel the policy for lack of payment.  Those business owners who are taking advantage of the 90 grace period must note that each carrier is handling this differently. It is important to communicate regularly with your agent or broker if you are changing your payment schedule.
  • A third point raised was a question over the status of furloughed or laid-off employees being included on the company’s healthcare policy – and if re-hired, what will be their re-entry protocol. The extraordinary circumstances brought by COVID-19 has changed the insurance environment – at least temporarily. As such, many of the guidelines have been lessened, including maintaining all employees on the healthcare insurance policy regardless of their standing as current employees at the employers’ discretion. Along those same lines, other rules have been greatly relaxed including the waiver of co-payments, deductibles (in network) for COVID-19 treatments and other similar requirements.  In addition COVID-19 related medications and future vaccines will be covered.  Rules regarding prescription refills and drug formulary requirements have been relaxed.   Telehealth service copays are being waived and your regular doctor will be able to provide visits via phone for Non-COVID -19 related medical needs at the standard copays. Special open enrollment periods will be allowed by some carriers.   Again, the same advice was repeated here: if an employer is keeping furloughed and laid-off employees on the policy for medical coverage, preserve accurate records regarding the period of the business shut down, the increase in costs and the decrease in income.
  • The fourth key point raised during the webinar focused on changes to worker’s compensation driven by the millions of people now working from home. Questions will be raised about their function, their responsibilities and where they are working as claims mount. The landscape has gone from a select group of employees working from home to ‘almost everyone’ working from home – a situation clearly ripe for a myriad of challenging problems regarding new classifications and codes! 

The Last Word!

The panelists shared their final thoughts as the webinar concluded. Here are their top tips:

  1. If you think you may have cause for filing a claim, maintain extraordinarily detailed records including bank statements, financial statements, payroll records and time sheets, records of your expenses, and a contemporaneous diary that supports a timeline of your activity and of the pronouncements, Acts and orders brought by COVID-19.
  2. Manage expectations. Business interruption might not be covered by your insurance, but file your claim anyway and keep records to support it.
  3. Make time to review the organization’s risk management plan. This pandemic is a wake-up call that reminds us to think about the answer to the ‘what if’ question.  Large and small companies and individuals, should be well prepared for any circumstance. This pandemic is a reminder to consider your exposure and identify ways to transfer or mitigate it. Don’t forget to look over your estate plan, confirm your power of attorney and healthcare proxies are current and easily accessible. 
  4. In the short term, talk to your insurance agent or seek independent consultative advise in considering how to lessen your exposure. Consider extending your premium payments over time, revising sales, payroll and vehicle fleet data now or renegotiate the cost of the policy. Know and protect your rights and understand the details of your policy.   Report any claims and keep all information that substantiates your position.
  5. Take time to think about all these tips – and other insights you have learned about since the outbreak. It is like drinking from a firehose. No sooner do you hear about one course of action, when some other suggestion is made. There are not enough hours in a day to keep up!  So to ensure that you take action, create a 30/90/180 day schedule and note the dates when you will implement or revisit one of the ideas suggested here that is most essential and applicable for your situation.