Media Coverage
Source: Law360
Media Coverage
Press Contacts: Erik Cummins, Matt Hyams, Olivia Thomas
03.13.20
Property and liability insurers are bracing for an uptick in claims across virtually every line of coverage due to the outbreak of the novel coronavirus, as companies lose money by shutting down large-scale events and businesses face supply chain troubles, according to an article by Law360 on the types of coverage ripe for disputes.
As the number of confirmed cases of COVID-19 continues to rise in the U.S., high-profile event cancellations have become a near-daily occurrence. Attorneys said that since late last month, they have been inundated with inquiries from insurers and event organizers seeking guidance on disputes over coverage under event cancellation policies, which generally cover at least some of the policyholder's lost revenues and out-of-pocket expenses.
David Klein, a Pillsbury Insurance Recovery & Advisory partner in Washington, DC, told Law360 that he has been in contact with conference organizers who reported they had recently purchased event cancellation policies with express communicable disease coverage for an additional premium. But according to Klein, upon receiving the policies, the organizers discovered they contained exclusions specifically for coronavirus — with no reduction in premium.
"That is a violation of state insurance regulations in every jurisdiction I know of," said Klein, who counsels policyholders. "That is likely to be a litigated issue. It speaks of panic in the insurance industry that they've tried such a bait-and-switch."
The COVID-19 outbreak has dealt a significant blow to the global economy, as many companies have had to temporarily shutter their own properties or experienced breaks in their supply chains.
Attorneys told Law360 that these economic woes have generated disputes over two types of commercial property insurance: business interruption coverage, which covers a policyholder's losses from having to shut down abruptly, and contingent business interruption, which kicks in when losses result from the closure of a policyholder's supplier.
For either type of insurance to apply, there must be proof of a "direct physical loss" to a property — in the case of business interruption coverage, the policyholder's property, or in the case of contingent business interruption, the supplier's property.
If an infected person has been inside of a property and physically contaminated it, that may be enough to meet the direct physical loss requirement, attorneys said.
"The ongoing research on COVID-19 indicates it may last longer in environments that are not hospitable, so it is possible that this will be a livelier coverage issue than it has been in the past," said Klein.
Workers' compensation insurers could soon face an influx of claims from workers who say they contracted COVID-19 while on the job.
In the case of first responders, it should be fairly easy to demonstrate work relatedness, given that they regularly deal with populations that are more vulnerable to infection, according to attorneys. But for other workers, even those in customer-facing roles, it may be more of an uphill battle for them to prove that their exposure to the coronavirus occurred at work.
"In this situation, it may be difficult to trace the origin of the illness," Klein said.
General liability insurance carriers will likely be pulled into the fray as companies face lawsuits over allegedly failing to protect customers from the coronavirus.
"All companies I know of are thinking about protocols to minimize harm, and a failure to do so may give rise to liability," said Klein. "For example, now that many colleges and universities have decided to end classroom instruction, any college that is a laggard in adopting that approach could later be viewed as negligent."