A novel coronavirus was detected in the Hubei Province of China. COVID-19 has since spread to dozens of countries and every continent except Antarctica. Although many people experience only mild symptoms, the illness can be severe. Deaths have been reported in multiple countries, including the United States. Business operations have already been impacted, and further business interruption are possible. Here’s what to expect and how to prepare.
The CDC has released guidance for employers and businesses. Read through the guidelines in their entirety, but here are some key points:
- Encourage workers to stay home when they are sick. If they show up to work sick, separate them from healthy employees and send them home.
- Keep work areas clean. Routine cleaning is essential.
- Remind employees to practice good hygiene. This includes covering the mouth when coughing and sneezing and keeping hands clean. Provide the necessary tools and supplies, such as soap and water, hand sanitizer, tissues and no-touch disposal receptacles.
- Check the CDC’s Traveler’s Health Notices before any employees travel abroad.
- If an employee is diagnosed with COVID-19, maintain confidentiality while notifying other employees of possible exposure and conducting a risk assessment.
If the coronavirus infects your workers, they probably won’t be eligible for workers’ compensation.
Although the novel coronavirus is new, we can look to similar illnesses to see what type of coverage is likely. As IA Magazine explains, illnesses such as the flu are not typically covered by workers’ compensation. Additionally, even though a worker may contact a virus at work, this is often difficult to determine for certain.
According to Insurance Journal, an illness must be occupational and arise out of conditions peculiar to the work to be eligible for workers’ compensation coverage. The novel coronavirus is unlikely to qualify, although some exceptional situations may exist.
While many P&C policies exclude or limit coverage for claims arising out of outbreaks and epidemics, Business Insurance reports that there are a few liability scenarios that could arise. One of those scenarios is directors & officers liability suits alleging that officers failed to lead corporate preparedness and/or response. Another situation could be employment practices liability suits alleging mismanagement of employees or discrimination against certain types of employees during the crisis.
Business Interruption Scenarios
Even with proper precautions, COVID-19 has the potential to interrupt businesses in many ways. Some of these scenarios are already being played out around the world.
- Community-wide quarantines and illness could prevent employees from showing up to work. This has already happened in parts of China. According to the BBC, China’s official measure of manufacturing activities, the Purchasing Manager’s Index, went from 50 in January to 35.7 in February as many factories struggled to find enough workers. Companies with factories in China have been impacted.
- Sick employees could force closures. Coronavirus is highly contagious, so one sick employee, client or customer could spread the illness to others. If exposure is suspected, temporary closures may be necessary to properly disinfect the building. According to CNN, more than 50 people at a nursing home in Washington have experienced coronavirus symptoms and will be tested. A local technical college temporarily closed due to possible exposure after 16 students and a teacher visited the nursing home.
- Consumer fears could keep clients and customers away. Widespread reports indicate that many people have been stocking up on hand sanitizer and other emergency supplies. At the same time, fear of coronavirus may cause people to avoid other places and services. Travel and tourism industries could be especially hard hit if people cancel their vacations, a possible response to news stories such as those surrounding the Diamond Princess cruise ship outbreak and quarantine.
Business Interruption Insurance
Many commercial insurance policies include exclusions pertaining to disease outbreaks. As a result, a standard policy likely will not cover business interruption caused by COVID-19.
However, the novel coronavirus has demonstrated that there is a significant need for business interruption coverage for viral outbreaks. The Insurance Services Office (ISO) has responded with two optional endorsements that can be used with commercial property forms in the future. They are NOT available as of yet.
The two endorsements provide limited businesses interruption coverage for circumstances related to the coronavirus. Coverage applies to the actual loss of business income and to the necessary expenses incurred if a civil authority orders the premises to close or to be put under quarantine to prevent infection or spread of coronavirus. The endorsements include additional details and exclusions.
ISO is not providing loss costs or supplementary rating information, and the ISO endorsements have not been filed and are not being added to the ISO portfolio of forms. If a company files the forms, all filing regulations must be followed. ISO will continue to monitor the situation as it develops.
Wilson, Washburn & Forster is a boutique independent insurance agency that has been in business since 1961. We have expertise and connections in the commercial insurance market and can also help customize the right mix of coverage and endorsements to protect against the unique exposures of your business. You will find that our experience, claims handling, service, and community commitment is unrivaled.
Contact us today to learn more about coronavirus business interruption endorsements or for a complimentary analysis of your current insurance program by an insurance specialist in this field at 786-454-8384.