As the COVID-19 cases are increasing in number and geographic spread, it is important for businesses to be prepared and be aware of how insurance may or may not be able to respond.
Business interruption is perhaps the most widespread coverage issue clients and prospects must consider right now. What can you do if your business-critical shipments and supplies are not sent from China and other parts of the world? Without supplies, manufacturers cannot produce their products, and without products to sell, the result is lost income. Traditionally, insurance policies do not include an extension that provides coverage for business interruption due to communicable disease or communicable disease response. Communicable disease and viruses are specifically excluded for pandemic scenarios on many property and liability policies in the manufacturing industry.
Many Chinese facilities remain closed due to government restrictions, resulting in a disrupted supply chain for many companies. There is a type of insurance coverage designed for this situation where businesses are restricted from opening and operating due to government intervention based on safety concerns called Civil Authority. Unfortunately, this type of coverage is typically domestic only and is often triggered by physical property damage.
Another insurance issue that businesses should be aware of is the impact of workers compensation exposure, as there may be more claims for lost wages, medical issues and testing claims. While it is difficult to prove where someone contracted a virus, because confirmed COVID-19 patients are being monitored very closely in an effort to control community spread, the potential may be more likely with this virus. That said, even if it can be proven that the infection was acquired in the workplace, an employee likely will not be covered, because a virus is not considered an occupational-related illness, according to certain provisions.
Across many industries, we are observing facilities closing due to fear. At the macro level, this will help prevent the community spread of COVID-19 to certain populations, but it will not trigger any coverage from insurance companies. Businesses are encouraging sick employees to stay home and for all employees to wash their hands frequently. Businesses should be prepared financially and operationally and have substitutes for products coming from certain parts of the world. Unfortunately, we must anticipate these added expenses and prepare for the potential of a supply chain disruption.
To best assist our clients and prepare for a potential impact of COVID-19, JKJ has partnered with a readiness advisor, Grassi Healthcare Advisors. We are committed to supporting clients through policy checking and coverage reviews, including those mentioned above, and any others that may also be required. We will to support you and your business and connect you to the best possible resources during these uncertain times.
Written by: Deanna Balerno Ireland | Vice President, Commercial Insurance | JKJ
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