COVID-19: BUSINESS INSURANCE GUIDANCE
As businesses are confronting unprecedented circumstances, Riddle Insurance is standing alongside clients and in support of the communities we serve. We realize the economic impact on businesses could be devastating and the complexities of insurance can be overwhelming. Many of you have valid concerns regarding coverage and billing.
As your trusted advisor, Riddle Insurance is providing you with our team's current beliefs pertaining to Business Insurance coverages. If you have or your business has these policies in your portfolio of coverage, we hope the information below provides some guidance where possible. Please understand that information from the insurance carriers continues to emerge daily. Our team is sharing insights based on what we believe as of Tuesday, March 24, 2020.
BUILDING / CONTENTS
Building and contents insurance helps you pay the expenses to repair or replace your property when it is damaged. An important factor to keep in mind with this coverage is there must be direct physical damage to the property caused by an event that is covered by the policy such as fire, wind, hail, etc.
In recent days, insurance industry experts have released information stating that it is highly unlikely a viral infection of or within a building constitutes “direct physical damage” to a building or business personal property. As a result, we believe Building/Contents (also called Business Personal Property) insurance will not respond to COVID-19.
Business Income (Interruption) insurance helps pay your continuing business expenses and offset lost profits when your property is damaged and as a result, your sales or income decrease, or in the worst case, your business can’t continue operating at all. Much like building and contents coverage, an important factor to keep in mind is there must be direct physical damage to your property caused by an event that is covered by the policy (again, such as damage from fire, wind, hail, etc.).
Sometimes, Business Income (Interruption) policies insure if a civil authority (government agency) mandates your closure or limits access to your location because of direct physical damage to other property required for entry or exit to your insured location. This “other property” could include infrastructure, a fellow occupant of a multi-unit building, or a strip mall. Once again, the damage to the other property must be caused by an event covered by your policy.
Occasionally, Contingent Business Interruption insurance is also provided. This insures your financial loss resulting from an interruption to your customer or supplier because of direct physical damage to their property. Their damage must be caused by an event that is covered by your policy.
As with the building and contents coverage, insurance industry experts have released information stating that it is highly unlikely a viral infection of or within a building constitutes “direct physical damage” to property. Unfortunately, as a result, we do not believe these three Business Income (Interruption) coverages will respond to COVID-19 or a resulting government shutdown of business.
Liability policies are designed to cover your business against a third party’s claim or allegation of bodily injury, property damage, or personal injury. The specific terms and conditions of your liability policy will determine what is covered. Research and opinions regarding General Liability coverage in response to COVID-19 have not yet been widely distributed by industry specialists. Riddle Insurance’s team will continue to monitor information regarding liability insurance, and we will share additional details as they become available.
In the meantime, if any allegation arises claiming that you may be negligent and/or may have contributed to injury or illness of a third party, we suggest reporting the allegation to your liability insurance carrier right away.
Your business’ Workers’ Compensation insurance covers your financial obligation to comply with a state’s laws if an employee is injured while at work. Kentucky and most other states’ statutes do not typically require employers to pay for an employee’s illness from communicable diseases. A common exception to this is when the environmental conditions of employment put the employee at increased risk. The Kentucky Labor Cabinet Department of Workers Claims has not released guidance at this early stage regarding COVID-19.
A limited number of Workers’ Compensation insurance carriers have suggested illness from COVID-19 may fit within the Kentucky statute for some specific industries such as healthcare workers and first responders. The insurance carriers also clarified if the statute does in fact apply, mere exposure to an illness may not fit the statute as would contracting such an illness. If it is ultimately determined an employee’s illness is subject to the Kentucky Workers’ Compensation statute, we believe your Workers’ Compensation insurance policy should cover these claims. If you employ healthcare workers or first responders, we suggest immediately filing a First Report of Injury if an employee is diagnosed with COVID-19.
THINGS YOU SHOULD DO
Like us, we know your business and lives are changing in response to COVID-19. For many, the changes are dramatic. There are some things we suggest you consider doing for your business.
- Please contact your Riddle Insurance Agent to discuss any changes you are making in your operations which may necessitate altering your insurance coverage. For example, some restaurants are now delivering that did not do so in the past; they may need to adjust coverages. We encourage you to reach out so we can provide you with guidance.
- Keep accurate records to document lost revenue and increased expenses related to the impact of COVID-19. Although our opinion is that most business losses will not be insured, you should still be prepared in case coverage is determined to exist. Maintaining detailed records may also benefit you if state or federal relief efforts become available.
- If you continue to pay your employees although they are not working, you should track that payroll separately. These supplemental payroll expenses may or may not be reportable for Workers’ Compensation or General Liability premium audits. This does not apply to employees working from home or from an alternate location.
- Develop a list of the key areas of your company that are being impacted, both financial and employee related. Tax issues and Human Resources are likely to be on your list. Get in touch with your advisors to help establish your plan of action.
- Familiarize yourself with federal and state assistance programs being created. Tax advisors may be key in helping you understand what these mean for you.
WE ARE IN THIS TOGETHER
Because we have not faced a pandemic in the United States in modern times, no uniform answers exist with certainty to questions as to whether insurance coverage will apply to COVID-19‐related losses.
The Riddle Insurance team reached the above opinions regarding Business Insurance to provide you with guidance, and we will continue to do so as each of us responds to this crisis. Your specific circumstances may be an exception to the opinions we are sharing. Please keep in mind, it is ultimately up to your insurance carrier to determine how coverage may or may not apply. Despite all of the current unknowns, if you feel you have an insured claim, we suggest submitting the claim to your insurance company.
As always, the Riddle Insurance team remains steadfast in our commitment to support clients in reporting and to assist as needed throughout the claims process. We will also continue working with industry experts to find potential insurance coverage that may help with the financial burden you and your business face during this tragedy. These are tough times friends. Nevertheless, we are in this together.