COVID-19 (Coronavirus) & Insurance Coverage(s) Implications

In the midst of COVID-19 (“Coronavirus”) spreading throughout the country, and the first case “presumptively” confirmed in Greene County, MO, I would like to provide you guidance on three insurance coverages relating to COVID-19.  

The three coverages included in the analysis are:

• Workers’ Compensation
• General Liability
• Property

The overwhelming question is, do I have any coverage for COVID-19 losses? The short answer to the question, “it depends”. Generally speaking, losses related to coronavirus could be covered under different policy forms, but circumstances and policy language are paramount.  

Before we begin, I hope you find the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out.

Workers’ Compensation: Is it compensable?

Various states across the country will have a different standard for compensability.  

In Missouri, the standard for compensability looks very similar to this relating to diseases: the employment must place the claimant at a greater risk to contract the disease than the claimant would otherwise be exposed as a member of the general public.  

The scenarios below explain the level of compensability further:

If a widespread outbreak happened in Springfield, MO, and an employee was infected with the virus in Springfield, MO, then this would be very difficult to prove that the organization put the employee at a “greater risk” due to the community outbreak. The injured party would less likely be awarded coverage due to the workers’ compensation standard of compensability.

On the other side, if a small outbreak happened within the organization, especially interaction with public heavy organizations (i.e. hospitals, hospitality, schools, entertainment, etc.), without the widespread outbreak, then the employee would have to prove the virus exposure was caused by a “greater risk” due to the course of employment which relates to your state’s standard for compensability.  

If the injured party proves, and can successfully meet the standard, of “greater risk”, through their employment, then the Employer/Insurer would be liable for:

• Medical benefits
• Temporary total disabled for time missed from work
• No permanently partially disabled due to most making a full recovery
• Death benefits in a worst case scenario – refer to mortality rate

For those employees that are quarantined at home, without a positive infection, there will be no benefits. Once a positive infection is confirmed, then the examples/analysis above would play out, depending upon your state’s statutes.

Please refer to your state's Department of Insurance, Division of Workers’ Compensation, and your Workers’ Compensation Carrier for updates and specific language to your state’s statutes.

Lastly, if an organization has prepared for COVID-19, including steps outlined by OSHA, CDC, and your state/local regulatory/governmental bodies, then the organization would be at a greater level of vigilance to possibly mitigate the risk of employee’s infection due to the “greater risk” in relation to course of employment.

General Liability: How did I get the virus? - Major barrier for injured parties

As workers’ compensation coverage provides a shield with statutes of employees suing an organization, this shield of statutes may not apply to suits brought by contract employees, and will not apply to customers and other third parties. General liability may provide coverage in these suits, if the terms and conditions of your policy allows.

The industries that interact with the public (i.e. schools, hospitals, airlines, transit systems, universities, supermarkets, etc.) may see litigation if their customers can link their illness to the staff illness within the organization. Very difficult to prove, but can be done.

The proof of causation will cause a major barrier for plaintiffs bringing suit against an organization. Especially with companies that have developed transparent, and implemented, COVID-19 related policies to limit transmission will have additional defenses in the battle over causation.

Lastly, for companies with foreign travel exposures, an organization may want to review the policy for coverage in foreign markets outside of the U.S. Reviewing for both coverage and structure in allocation of the terms and conditions for U.S. liability and international liability would be necessary in the current pandemic.

Property: Direct physical damage occurring, or not? 

Generally, property policies cover direct physical damage or damage to insured property resulting from a covered peril (perils depend on the language on your form). Without the direct physical damage or damage to insured property from a covered peril, income loss is generally not covered. Especially when income loss is associated with employees choosing not to travel or customers not visiting a business, even in the state of travel restricted from the government, generally does not trigger property insurance coverage due to no direct physical damage or damage to insured property.

In a few cases, some property policies may include lower sub-limits for coverage of income loss associated with disease, murder, and suicide, which occurs at an insured location. The sub-limits, if included in your policy, are generally very niche in the industry that is issued including hospitality, retail, and entertainment.

In addition, the sub-limits language are, in most cases, used for losses resulting from the loss of customers due to a disease, murder, or suicide at your business, not from preventive quarantine or restricted travel.

Lastly, contingent business interruption coverage generally provides coverage from a direct physical damage to a property of a customer or supplier. The COVID-19 would not generally constitute as physical damage to property, so the insured’s loss from the inability to supply a customer or the supplier’s inability to supply the organization would generally not be covered under COVID-19.

Closing: Review your terms and conditions

To reiterate, the scenarios above are examples of possible coverage scenarios related to COVID-19 and does not signify you have the proper terms and conditions in place for your policy to provide coverage for the COVID-19. 

If you have any general questions or questions over policy language and forms, then please reach out to us. We are happy to review your policies for terms and conditions relating to COVID-19.

In addition, if you are looking for templates for forms that relate to prevention, policy, memo, etc. for COVID-19 for your organization’s human resources, please reach out.