Insurance for COVID-19 Losses: Could There Be Coverage Hidden In Your Insurance Policy?
By Procopio Partner Cecilia O. Miller, Senior Counsel Ryan C. Caplan and Senior Associate Alexandra “Sasha” Selfridge
As the world grapples with the human toll inflicted by the coronavirus known as COVID-19, the resulting financial toll, including shuttered businesses and cancelled events, is starting to come into focus as well.
It is unlikely that any business will emerge from the COVID-19 pandemic without suffering financial scars that, in turn, add to the already devastating human toll including lost wages and income.
Fortunately, businesses may have in their arsenal a weapon to mitigate the financial havoc caused by COVID-19: insurance. While certain commentary in the wake of COVID-19 opines that there is no insurance for a pandemic, that commentary is dangerously generalized.
Depending on the particular provisions of your policy and the circumstances of the losses suffered by your business, there very well may be coverage for COVID-19 losses in your insurance portfolio. Below are some steps to uncover those hidden resources that might carry your business through these challenging times.
1. Business Interruption Coverage
If you have commercial property insurance for your business—and you likely do unless you are strictly an online presence—your commercial property insurance package may well include coverage for business interruption and the losses arising from same including loss of profits. Most business interruption coverages are written to require some form of physical loss or damage to trigger such coverage, which can prove difficult with a contagion such as COVID-19.
However, even if your policy appears to require “physical loss,” you still may have triggers for coverage hidden in the policy. For example, some policies are written to include “loss of use” of property that has become uninhabitable or unusable, which may well extend to the COVID-19 related shut downs.
Even if “physical loss” is a predicate to coverage, the circumstances of COVID-19 and your premises may encompass physical loss. For example, to what degree have surfaces at your premises been contaminated by the virus and become a medium for spreading the virus due to heavy customer traffic prior to a shut down?* Could your HVAC system have been contaminated? A novel virus requires novel arguments to avoid a superficial determination that there can be no coverage without “physical” damage.
While many commercial property policies may exclude certain “contaminants,” such as mold and bacteria, COVID-19 is viral and may not fall within such exclusions. As is typical with insurance coverage, the devil is in the details of the particular exclusion language and caselaw based arguments to avoid a broad reading of exclusions from coverage.
Thus, depending on the particular provisions of your policy and the particular circumstance of the interruption of your business, there may be coverage. But, business interruption claims often raise unique questions as well as proof and quantification challenges. For example, a policy’s particular waiting period may dictate notice of a claim even though the details of the claim are evolving. The circumstances of COVID-19 introduce an additional complicating factor to an already complicated and discretion-laden process for which prior business interruption claim experience is imperative.
2. Civil Authority Coverage & Other Specialized Coverages
Your business’ insurance portfolio may be hiding some other forms of specialized coverage that might apply to these unprecedented times.
For example, some traditional property insurance policies may also include sub limits for civil authority coverage, which provides coverage for loss of income resulting from restrictions on access to insured premises by a government or civil authority. Similar to business interruption coverage, this coverage may require “physical loss” or damage such that the potential arguments noted above may be useful in disputing any hasty denial of coverage.
Whether—and most importantly when—the successive and increasingly aggressive orders from the federal, state, and local governments meet the requirements of a policy’s civil authority coverage remains an open question. Again, this is dependent upon particular policy language and the circumstances of your business.
Certain industries such as hospitality, medical services, or retail may have unique coverages or coverage extensions under which COVID-19 would be a covered peril, including, for example, sub-limits for viral outbreaks.**
Event cancellation insurance may also be in play if a business procured some. These policies may not be triggered, however, if the cancellation is voluntary or if the policyholder fails to attempt to reschedule the event first.
Making claims under each of these coverages pose traps for the unwary.
3. The Squeaky and Represented Wheel Syndrome
In the growing wake of COVID-19, the insurance industry is facing a barrage of claims not experienced since the aftermath of September 11, 2001. Persistence on the part of a policyholder may not be sufficient to get the requisite attention of the assigned claims adjuster. In these situations, it may require the intercession of coverage counsel to demonstrate to the insurer that the business is serious in his or her pursuit of coverage owed.
Each policy and circumstance is unique. Thus, perfunctory conclusions that your business losses are not covered should be viewed with skepticism. A review of a business’ entire insurance portfolio by an insurance coverage practitioner who can identify these potentially applicable coverage and advise on the nuances of tendering and pursuing a claim could pay significant dividends that allow a business to stay afloat during these tumultuous times.
* Per the U.S. Centers for Disease Control and Prevention: “It may be possible that a person can get COVID-19 by touching a surface or object that has the virus on it and then touching their own mouth, nose, or possibly their eyes …”
** See, e.g., “Limited Fungi, Bacteria or Virus Coverage Endorsement,” Hartford Form SS 40-93-07-05.
Cecilia O’Connell Miller is a Partner with Procopio. Her practice focuses on complex commercial litigation and pre-litigation counseling with a focus on insurance coverage recovery. She has extensive experience in representing technology, financial services, life sciences, hospitality, multi-media, healthcare, manufacturing, construction and municipal clients obtaining millions in insurance coverage for first and third party liabilities under a wide range of insurance policies. Ceci’s practice encompasses trial and appellate representation of her clients in arbitrations, state courts and federal courts across the country.
Ryan C. Caplan is a Senior Counsel with Procopio. He represents clients in areas of litigation with a focus on insurance coverage, corporate and commercial litigation, and appellate representation. He is experienced in all aspects of business and civil litigation, contract disputes, unfair business practices, employment matters, and complex litigation. He has represented clients in partnership disputes, corporate governance disputes, insurance/bad faith matters, and trade secret matters.
Alexandra “Sasha” Selfridge is a Senior Associate with Procopio. She is an experienced trial attorney in a wide range of civil litigation, including insurance coverage and bad faith, appellate practice, business litigation, premises liability, breach of contract, construction defect, products liability, and transportation litigation.