Insurance Coverage and COVID-19 – UPDATE 3/27/2020
By Larry Cook
This is an update to “COVID-19 CLAIMS: DOES BUSINESS INTERRUPTION INSURANCE HELP?”
Contractors, like most other businesses in America, have suffered losses from the Coronavirus. It is likely that they will continue to do so in the coming months. Business insurance is designed to spread their risks. How contractors and the insurance industry handle these risks will be a unique challenge.
You Commercial General Liability (“CGL”) covers your insured business and property. Part of that policy is “business interruption” coverage. This coverage insures against losses due to shut down or restrictions of the business operations by direct physical loss or damage to the property covered by the policy. Whether a shutdown in operations due to the COVID-19 risk causes physical damage or loss to property within the meaning of the policy is likely to be a primary issue raised by insurers in response to claims. Types of covered claims will be fact-specific and will heavily depend on the terms of the business policy.
In addition to the direct physical loss or damage requirement, some policies may include an exclusion for microbes or viruses or provide a sublimit of coverage for that risk. In addition, the policy may also include coverage for civil authority, that is, where a business is affected by an order of a governmental authority, such as a “shelter in place directive” that forces closure of an office or workplace.
In the event a contractor or developer is forced to shut down a project due to COVID-19, these same issues should be addressed in the context of builders risk coverage for physical damage to the work. Moreover, a related coverage that may be available in a particular policy is contingent business interruption coverage. This coverage applies to loss of materials or equipment due to the shutdown of a key supplier to the project.
Claims by employees that they contracted COVID-19 while in the course of their employment will undoubtedly result in a spate of workers compensation claims as well. Coverage will likely depend on whether the employee’s employment duties were tied to the contraction of the virus, which is not considerably different from other occupational diseases.
New developments are occurring daily in what is clearly a new area of insurance coverage and will just as surely require the advice of a construction expert.
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