Coronavirus & Insurance: FAQs for Business Owners

As always, it is critical to review your individual policy because each policy and claim is unique.

by Dan Tharp, Pearl Insurance
Dan Tharp

The novel coronavirus, aka COVID-19, has created widespread economic disruption at an unprecedented level across the world. As doctors, scientists and politicians race to find a vaccine—or an effective treatment—business owners who have been forced to temporarily shut down now face an uncertain future. Many question how business policies can help employers during this critical time. The following are some frequently asked questions about COVID-19 and how business insurance can help employers.

What would insurance cover if a business is temporarily shut down?
Generally, we would look to business income—or business interruption—insurance for relief when a business is not able to open its doors. Unfortunately, this is property coverage and there must be a covered loss (usually damage to the premises) to trigger such coverage.

If there is not a covered loss, business income insurance will not provide a business owner with financial relief. A loss resulting from viruses capable of inducing illness or disease is not covered and is excluded by most carriers by endorsement.

Each scenario is unique. Specific circumstances of the event will determine if a covered loss has occurred, which would warrant this kind of coverage.

Does insurance help cover operating expenses if employers get sick?
You may be eligible for benefits through your professional overhead expense policy if you are not able to work due to having or being exposed to COVID-19. To be eligible for benefits, you must submit medical documentation by a medical professional that your sickness (COVID-19 exposure) meets the policy’s definition of a disability and prevents you from performing your occupation.

A quarantine situation must also be supported with medical documentation. Recommendations from elected officials or Centers for Disease Control and Prevention (CDC) guidelines, office closure, or absences from work due to childcare issues do not qualify.

Many factors will determine if a claim will be covered, including the type of coverage and the terms and conditions of the certificate and policy.

What does insurance cover if you’re forced to shut down?
As mentioned above, it is unlikely that a business owner will be afforded coverage under most business owners’ or general liability policies for any type of loss related to the COVID-19 virus or resulting shutdowns. Some mitigating circumstances may include endorsements, which add coverage for viruses, or loss of supply chain (suppliers not able to deliver vital material for operations).

If you have an employee with COVID-19, are you held responsible if others contract it?
If you were in violation of the law or placed an employee in exposure to the virus deliberately and with intent to infect (malice), yes, you may be held liable. Otherwise, no, you cannot be held responsible.

What assistance is being discussed to help small business owners?
Any type of substantial relief will not come from commercial insurance. Local, state and federal sources should be investigated. Low-interest loans for businesses affected have been made available by the U.S. Small Business Administration.Any type of substantial relief will not come from commercial insurance. Local, state and federal sources should be investigated. Low-interest loans for businesses affected have been made available by the U.S. Small Business Administration.

Would workers’ compensation help mitigate the cost for employees?
Two tests must be satisfied before any illness or disease—including COVID-19—qualifies as occupational (and thus compensable) under workers’ compensation:

  • The illness or disease must be occupational, meaning it arose out of and was in the course and scope of the employment.
  • The illness or disease must arise out of or be caused by conditions peculiar to the work.

So, does the coronavirus create a workers’ compensation exposure?
The short answer is not likely. Other than the fact the coronavirus is currently garnering intense attention, in most cases it is no more occupational than the flu. It may be possible for employees to apply for unemployment insurance if they are not eligible for workers' compensation.

However, if—and only if—it is proven the employee has an increased risk of contracting the virus due to the peculiarity of his or her job, the coronavirus would be considered occupational and thus compensable. Remember, compensability as an occupational illness requires something about the job that increases the risk of exposure and illness.

As with all situations, it is critical to review your individual policy because each policy and claim is unique. Carriers will assess claims in accordance with the coverages the insured has in place and the facts presented. It is not possible to answer any hypothetical questions or claim scenarios regarding the coronavirus. If you believe you have a claim, please report it to the carrier as you normally would. Carriers are ready to follow their regular processes and protocols and engage you as needed. PM

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