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COVID-19: Does my insurance cover this? What regulations impact us?

Date: March 31, 2020

Andrew Schlaffer, President of ACO Insurance Group


There is much information being distributed regarding the Coronavirus (COVID-19), some valuable and some not so much. However, the impact of this pandemic is clearly widespread and it undoubtedly affects every business to some degree. This article will discuss why insurance may or may not be available to cover your business interruption, highlight what regulations owners should be aware of and provide reliable educational resources to explore.


What is Business Interruption coverage?

Most commercial property insurance policies offer coverage for loss of income when a business suffers damage to its premises by a covered cause of loss, which results in diminished or suspended operations. Coverage applies to loss of revenue suffered during the time required to repair or replace the damaged property. It may also be extended to apply to loss suffered after completion of repairs, but only for a specified number of days (typically referred to as Extended Business Income). Additionally, business interruption coverage can be purchased to protect an insured’s exposure from loss of income arising from or caused by a covered cause of loss to contingent or dependent properties (i.e. supply chain).


Do we have coverage for COVID-19?

Simply put, most standard insurance policies will not respond to business interruption claims resulting from COVID-19 unless “direct physical loss or damage” occurs to covered property caused by, or arising from, the virus. In this scenario, insureds might review and seek coverage in the following business interruption coverage forms: Civil Authority, Contingent/Dependent Business Income, Utility Services – Indirect Damage or Environmental Liability. Unfortunately, what they will discover is that coverage will only be triggered if “direct physical loss or damage” to the insured’s property or property of their vendors occurs. That said, several lawsuits are currently in litigation that challenge the interpretation of what is considered “direct physical loss or damage” to include property rendered uninhabitable or contaminated by a dangerous virus (such as COVID-19) or bacteria that can physically infect an object or materials.

For example, a restaurant discovers that their furniture and kitchen equipment is contaminated by the virus. The physical contamination in this example could be considered “direct physical damage” at which time the business would potentially have access to business interruption coverage until the premises is thoroughly cleaned and/or repaired to its pre-loss status.

Ultimately, coverage applicability is determined by the insurance carrier once a claim is officially submitted and adjusted. Regardless of whether your business interruption policy responds to this specific risk, this pandemic highlights the importance of working with your insurance professional to better understand your operational risks and the available insurance solutions before a claim occurs.


If an employee contracts COVID-19 at the workplace, would this be a Workers’ Compensation claim?

Generally, “ordinary diseases of life” are expressly excluded by workers’ compensation policies unless an employee can establish a direct causal connection to their workplace. If the employee can prove the virus was contracted as a result of their employment and such exposure is in excess of what is found in the general public, they may have an argument to obtain workers’ compensation benefits.

A Few Regulations & Best Practices to Consider:

Real Estate-Related Companies:

What if a resident is confirmed to have COVID-19?
- Immediately notify the local health department and Centers for Disease Control and Prevention (CDC) for guidance.

What is the best way to handle resident requests?
- Many owners are adjusting their official service offerings to comply with emergency work orders, which will reduce workloads for already limited staffing. This also promotes further social distancing and helps reduce the likelihood of COVID-19 transmission.

What are some preventative measures to reduce the spread of COVID-19 on premise?
- Rigorously clean units during tenant turnovers using effective disinfectant products recommended by the Environmental Protection Agency (EPA).
- Work to comply with the Department of Housing and Urban Development (HUD) requirement to provide “safe and sanitary” housing. Good practices may include assigning staff to disinfect common area surfaces such as tables, desks, handrails, doorknobs elevator buttons, etc.

Construction-Related Companies:

What are our responsibilities as an employer?
- Occupational Safety and Health Administration (OSHA)OSHA requires employers to provide a safe work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm.” Employers should continue monitoring the development of COVID-19 and comply with local, state and federal mandates to implement preventative measures and to maintain regulatory compliance. Furthermore, OSHA confirmed that incidents of employee contracting the COVID-19 at work are recordable illnesses.  

- Family and Medical Leave Act (FMLA)An employee may be protected by the FMLA and qualify for benefits if they experience a serious health condition or if they need to care for a family member with such a condition. FMLA also provides rights for some employees of companies with fewer than 500 employees, guaranteeing partially paid leave after 10 days of absence due to school or childcare closures. 

- Americans with Disabilities Act (ADA)The Equal Employment Opportunity Commission (EEOC) has stated that sending an employee home who displays symptoms of contagious illness does not violate the Americans with Disabilities Act restrictions on disability-related actions. 

Quick summary of Executive Orders:

General Rule: Many states are mandating the number of patrons at businesses to 10 people or less amidst the COVID-19 pandemic (also applies to public parks, playgrounds, etc.).

Maryland, Virginia, DC and North Carolina: Passed executive orders mandating shelter-in-place for many residents.



Further References:

Families First Coronavirus Response Act