Many U.S. businesses face income losses from theft, vandalism and resulting curfew orders, which have affected numerous cities in recent days.
Commercial property insurance policies may provide coverage for these losses, which are and should be treated as a separate claim from pandemic-related losses. Property policies cover physical damage to property and, usually, also provide coverage for business interruption losses if certain conditions are met. Whatever position insurers may take on contamination from COVID-19, they cannot plausibly contest that shattered windows, broken fixtures and stolen merchandise are physical loss or damage. And, while insurance policies vary, typically there is business interruption coverage for “Civil Authority” orders, such as curfews requiring businesses to close. Nearly always, such coverage requires the existence of property damage within some limited geographic radius surrounding the policyholder’s location. This often ranges from one to 10 miles. So if your business is closed by a curfew order and, for example, a building down the block had its windows shattered by thrown bricks, or worse, there is every reason to submit a claim. Bear in mind that, depending on the wording of your policy, the trigger for Civil Authority coverage may not be limited to damage to buildings: it may apply to property within buildings and property in the street, potentially including vandalized vehicles. Think outside the box (store).
The profound impact of COVID-19 leading businesses to file first-party insurance claims is now well known. Further, insurance companies are systematically pushing back on potential coverage for COVID-19, with some issuing blanket coverage denials without investigation. In other words, this is not an ordinary claims environment. Against this backdrop, many policyholders are facing what may be their first significant insurance claim. This primer will familiarize such policyholders with the initial steps of the first-party insurance claims process. Whether a potential claim is related to COVID-19 or not, understanding the claims process is the best first step towards avoiding pitfalls and maximizing chances of recovery.
A couple months into the widespread shift to remote work for many employees on a temporary basis, an increasing number of companies are considering or already implementing a permanent shift to remote work for most or all of their employees. Unsurprisingly, this shift is rapidly occurring in the technology industry. For example, Twitter’s CEO announced this week that its employees will be allowed to work from home permanently. But it is also occurring across other industries, including the insurance industry. For example, Nationwide is planning to permanently exit its building space, other than four main campuses, before the end of the year and is moving its other employees to permanent remote-working status.
A few months into the COVID-19 pandemic, the insurance focus (understandably) has been on business interruption and event cancellation coverage. Various other coverages are in play as well, given the types of COVID-19-related claims and lawsuits being filed (and that will be filed in the future) against corporate policyholders, from bodily injury due to exposure to the virus, to breach of contract, to securities violations, to misrepresentations and consumer protection violations, just to name a few. However, cyber risks are also highly salient for companies in this “new normal,” and companies must consider the role their insurance plays in preparing for and responding to those risks.
In the uncertain times ushered in by the COVID-19 pandemic, observers of the insurance law landscape can find footing in an old, familiar story: a single insured left deeply dissatisfied by her insurance provider’s coverage for an accident lawsuit against her. But in In re: Farmers Texas County Mutual Insurance Co., a novel question of settlement authority offers the chance to make new law.
We have written much about business interruption coverage for losses arising from the COVID-19 pandemic, and expect that those losses will continue to dominate the insurance landscape for the foreseeable future.
But, in recent weeks, another trend has emerged that will also significantly impact businesses: third-party lawsuits related to COVID-19 alleging causes of action ranging widely from negligence to wrongful death to false advertising to breach of contract to securities violations. In much the same way that businesses should evaluate coverage for lost profits, so, too, should those that face claims and lawsuits be prepared to seek insurance coverage for their defense and indemnity costs.
Over the past several weeks, news reports and their accompanying headlines have signaled what could be a pitched battle between policyholders and insurance companies over coverage for COVID-19 losses. One article noted that “insurance companies are facing political pressure to pay what could be a crippling sum of coronavirus-related claims—even though many of them say their policies don’t cover pandemics.” The headline of that article declared: “Insurers scramble to avoid 9/11-style coronavirus backlash.” Another piece described how the insurance industry had flatly rejected pressure from federal lawmakers “to pay out on business interruption claims from small businesses shut down due to the coronavirus pandemic.” Insurance companies are asking their governments to provide subsidies to cover the losses. Against this backdrop, it is little wonder that lawmakers in Ohio, Massachusetts, and New Jersey have proposed legislation that would retroactively expand business interruption policies to cover losses due to the coronavirus outbreak.
When an insurer pursues a judicial determination on its duty to defend and agrees to defend its insured retroactively only five months after its insured initially requested a defense, has it breached its duty to defend? In most jurisdictions, the answer would be “yes.” In California, for example, an insurer must afford an immediate and entire defense in response to a tendered claim that is potentially covered under the Buss doctrine; belated, after-the-fact payments cannot cure that breach. But under the rule of a new Wisconsin decision, however, the same insurer would not have breached its duty to defend.
In January, we were among the first to post on the insurance implications of coronavirus. Since then, the epidemic has landed on our shores, dragged down the stock market, and become a political football. It has affected supply chains originating in China, with significant results for companies like Apple. And it threatens business continuity in the U.S. It is important to remember that the threat to the economic cycle does not originate from financial forces like a tightening of credit, but in nuts-and-bolts workings of the manufacturing and service economy, where both bottlenecks in supply and a pullback in demand threaten markets. Some of these losses are insurable. This post reviews recent coverage developments and notes practical coverage considerations that companies might overlook.
