COVID-19: Potential Insurance Claims – Know Your Coverage
This Alert provides only general information and should not be relied upon as legal advice. This Alert may be considered attorney advertising under court and bar rules in certain jurisdictions.
For more information, contact your Franklin Scott Conway LLP attorney or the authors listed below.
The toll on small and large businesses alike caused by the Covid-19 outbreak cannot be underestimated. The effects that the virus has had and will continue to have on the market, the economy and the public trust—including supply chain disruptions, voluntary and mandatory quarantines, “social distancing” and travel restrictions—are directly impacting businesses of nearly every type.
If utilized properly, insurance policies you have purchased that provide indemnification for business interruption losses, “civil commotion” losses and general liability claims may provide indemnification to offset some of these losses. As a policyholder, you must be proactive to protect your rights under these insurance policies.
What to do if you suffer financial loss:
Review Your Policies & Notify Your Insurers. As a Policyholder, you should review the coverages provided by your insurance policies and immediately notify your insurers under all potentially applicable policies if you suffer any loss. Each policy has specific instructions for how to provide notice to the insurer, and these instructions should be explicitly followed. If potentially applicable policies are not immediately identifiable, consider retaining coverage counsel to review all of your policies for all potential coverage.
Document Your Losses. Take reasonable steps to mitigate any losses you suffer but, to the extent possible, document and evidence those losses so that typical issues and disputes that arise later in the claims process might be avoided. If business interruption (BI) coverage is implicated under your policy, you bear the burden of substantiating all of your claimed BI losses. Even where a BI claim is accepted, the processing of valuing and adjusting claimed losses is challenging given the uncertainties of future or projected revenues.
Prepare the “Proof of Loss”. Most policies require that a “Proof of Loss” be submitted within a certain period of time after the loss is incurred. Policyholders need to be mindful of the deadlines imposed by their policies and cooperate with insurers and adjusters so that they have all of the information, evidence and data required to make a coverage determination and pay the claim. When all of the information necessary to substantiate the loss is not yet available as of the time the proof of loss is due, policyholders should either seek to extend that deadline or timely submit a proof of loss while reserving the right to supplement it as additional information becomes available.
Issues to Consider and Expect:
Not all policies are alike. Commercial insurance policies typically vary in their terms, conditions, exclusions and definitions. BI and Contingent Business Interruption (CBI) coverage provisions vastly differ among policies and their endorsements, but most often require physical loss or damage. Thus, in the context of COVID-19, the requirement for physical loss or damage creates difficult problems of proof for many insureds because the loss of use, or loss of access to your business property or loss of customers is not likely to trigger coverage requiring physical loss or damage. But some BI coverage provisions are broader in their definitions of a covered “peril” and may include “civil commotion” or other perils that might extend to the virus and its attendant quarantines and restrictions.
In addition, some insureds may have “all risk” coverage that might be triggered by all perils that aren’t specifically excluded by the policy and thus would encompass COVID-19, while others may have policies that specifically exclude coverage for losses caused by quarantinable disease or other risks defined broadly enough to include the virus.
Not all policies are alike. The language in your policies is what matters and will dictate whether your losses fall with their scope of coverage and/or the availability of potential legal arguments that your losses fall within their scope of coverage.
Quantifying BI and CBI losses. BI claims can be difficult to quantify. Issues or disputes that often arise include the determination of: (i) how long business is “interrupted”; (ii) the reasonable costs to get the business up and running again; and (iii) the amount of lost profits incurred by the policyholder. Also difficult to quantify are CBI claims, which often arise when: (i) a business’ suppliers are prevented from delivering materials necessary for the business to operate; or (ii) a business’ customers are prevented from accepting its goods or services.
Other Liability Claims. The event cancellations, mandatory and voluntary quarantines, travel restrictions and social distancing measures that have resulted from the uncertainty of COVID-19’s spread are disruptive to businesses. It is only a matter of time before frustrated people and businesses unable to prevent or find cover for their losses start looking for others to blame. If you are presented with a demand or a claim or a lawsuit, be sure to immediately notify your liability insurers so that they can step in to defend and/or indemnify your business.
Businesses may be able to recover some or all of the losses incurred as a result of COVID-19. The insurance claims process, from notification through resolution, can be complex and time-consuming, but staying proactive and knowledgeable about potentially applicable policies, and their terms, conditions and exclusions will keep you, as a policyholder, on an even playing field with your insurers.
FSC Legal’s insurance coverage lawyers have decades of experience working with the types of policies that may be implicated by any losses or claims resulting from COVID-19 and its aftermath, and we use creative tactics to achieve maximum recovery for our clients. If your business is adversely affected by the virus, we welcome the opportunity to review your insurance policies at no cost to you and, if we identify potentially applicable coverage, we will work with you under a contingency or reasonable fee arrangement to achieve a recovery.
This article provides only general information and should not be relied upon as legal advice. This article may be considered attorney advertising under court and bar rules in certain jurisdictions.