Coronavirus Disease 2019 (abbreviated "COVID-19") remains an extremely serious and rapidly evolving global problem. Cases have been reported in at least 100 countries - with more than 100,000 infected and over 4,000 dead. Currently categorized as an epidemic, the World Health Organization is predicting pandemic status in the very near term.
To date, the disease's physical impact in the United States has been relatively limited (with 1,000 reported infections and 25 confirmed deaths as of this writing). Although fully expected to worsen, COVID-19's more immediate impact in this country has been financial. Businesses of all sizes have felt the effects of the outbreak – with the hospitality, retail, and food/beverage industries among the hardest hit.
In the light of COVID-19's acute and expanding threat, corporate policyholders are scrambling to counteract the economic impact of this worldwide crisis. Insurance could be a valuable weapon in any company's arsenal. With that in mind, here are three essential steps that all corporate policyholders must immediately take.
First: Review and Understand Your Insurance Policies.
There are several specialized insurance products/endorsements on the market that could respond to COVID-19-related losses. Among the most obvious are those drafted to address: pandemics; communicable diseases; and event cancellations. As with any insurance contract, the existence and extent of specialized coverage is determined by the specific terms and conditions that were negotiated at policy inception. Do not assume you are covered – instead, undertake a careful review to determine if and how your specialized policies might respond to this particular crisis.
Although the coronavirus could spawn a sea-change, the present reality is that most US businesses do not maintain the specialized insurance products mentioned above. Thus, the most likely source of potential coverage for most corporate policyholders will be their commercial property insurance. Property policies (sometimes referred to as "All-Risk Policies") contain a series of provisions that could potentially respond to COVID-19-related losses. Such coverages include:
- Sue and Labor (costs incurred for the temporary protection/preservation of property);
- Business Interruption (loss of profits due to a covered event);
- Contingent Business Interruption (losses caused by damage to your key suppliers);
- Civil Authority (losses related to an inability to access your premises due to government lockdown);
- Ingress/Egress (inability to access property as a result of an insured peril); and
- Extra Expense (costs incurred to continue normal operations following a loss)
Notably, many property policies require "direct physical loss or damage by a covered peril" as a prerequisite for the foregoing coverages. Some policies also explicitly preclude coverage for losses arising from viruses. Given the potential obstacles presented by such triggers and exclusions, a close reading of your policies is essential.
Second: Enlist the Assistance Of Insurance Professionals.
The success of any insurance claim turns on two significant points: (i) policy analysis; and (ii) claim presentation. And the best way to accomplish both is to enlist the assistance of insurance professionals. Coverage Counsel and Forensic Accountants are highly specialized practitioners who comprehensively analyze policies, accurately document losses, and proficiently present claims. Insurance carriers rely heavily on such experts to evaluate (and in many cases deny) claims – particularly when faced with a global crisis involving billions of dollars in economic losses. It is imperative that policyholders draw upon these same essential resources.
Third: Tender Claims Promptly But Pursue Coverage Patiently.
Timely notice of potential claims is crucial. Many policies contain specific instructions regarding how and when notice should be delivered. Unfortunately, the hysteria surrounding a potential pandemic can lead to errors among even the most conscientious of policyholders – and, when steps are missed, insurance dollars can be lost. "Prompt and deliberate" is the mantra for tendering claims.
Once a claim has been timely tendered, patience becomes the key. When faced with large-scale losses, many insurance carriers attempt to resolve claims as quickly as possible. In concept, that's a good thing - but in reality, it may not be. The long-term impact of a catastrophic loss is never immediately apparent, and early offers of settlement are almost always at reduced rates. Here again, you must rely upon Coverage Counsel and your Forensic Accounting Team – because, when it comes to successfully resolving insurance claims, patience always pays off.
The Pryor Cashman Insurance Recovery + Counseling Team has extensive experience in analyzing policies, preparing for catastrophic losses, and maximizing insurance recoveries in their wake. So, whether your company is bracing for coronavirus-related damage, or has already sustained it, please contact Chris Loeber or your Pryor Cashman attorney. We're here to help.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.