Insights & Advice for a Post-COVID-19 World
The pandemic has cast light on both the flexibilities and limitations of insurance policies and coverages. But, perhaps more so than at any other time in history, it has also highlighted the imperative for what-if planning, risk mitigation and well-thought-out insurance coverages necessary to ensure your business is ready for “when.”
As we come to terms with the largest public health and economic crisis of modern times, we have assembled a list of the most-common questions, and answers, we’ve heard from our Clients over the past few months, as well as key insights to help you rebuild and reinforce your business for the future.
IN THE REARVIEW MIRROR
Before we look ahead, here are a few of the most-common questions we’ve received since the pandemic took hold, and answers to each.
Q: My business was severely impacted by COVID-19 quarantines and supply chain interruptions. Why is my business interruption policy not covering these losses?
A: In order to cover losses, business interruption policies require a certain sequence of events leading up to the claimed loss. Specifically, these policies require there first be direct physical damage to property that then triggers the interruption to an insured’s business. In the case of a contagion like Coronavirus, it’s very difficult to demonstrate physical property damage, and as a result carriers are denying claims related to COVID-19 losses.
Q: Will the federal or state government force carriers to pay out business interruption claims?
A: The Universal Commercial Code, which ensures conformity in the application of commercial contracts in all 50 U.S. States, the District of Columbia and all U.S. Territories, prohibits one party in a transaction from unilaterally changing the terms of a contract. So, while politically popular, legislation which could require carriers to pay out business interruption claims violates the Code, and we are unlikely to see any rapid change. As court cases mount against carriers for denied business interruption claims, Alper will keep a close eye on the situation and provide ongoing counsel to our Clients as necessary.
Q: Do I qualify for rate adjustments due to COVID-19-related changes in my workplace?
A: Most likely, yes. If you closed facilities, furloughed employees, or shifted employees to home offices, it is very likely your risk profile changed. Alper’s proprietary AuditRate review can identify these opportunities for savings, and advocate on your behalf with carriers for rate adjustments, and even secure refunds for past premium overpayments. In addition, some auto insurance companies are allowing a “suspended credit” if your commercial vehicles sat idle. Check with your Alper Account Executive to see if you could benefit from a rate adjustment.
Until a vaccine is available, COVID-19 will continue to circulate through the population as our cities and economies re-open. With the virus a continued threat, the speed by which businesses return to normal will vary, entirely new risk states will emerge, and pricing and restrictions for certain types of insurance will fluctuate. Here are a few situations to consider:
1. Many business owners are concerned about a customer exposed to the virus and becoming ill, or even dying. Conceptually, General Liability policies may defend businesses against these customer injury/death claims. However, this is a topic of intense partisan debate in Washington DC at the moment—with one side calling for a moratorium on liability, and the other calling for increased rights to pursue damages. With the surge in infections continuing as more businesses attempt to re-open, the potential demand upon insurance carriers will increase commensurately, and the intensity of the debate only increase.
•Mitigation: In order to reduce the risk of your customers contracting the virus, and your risk of expensive litigation, take steps now to ensure consistent, diligent application of CDC-recommended measures across all customer touch points.
2. With more employees working from home in environments not optimized for semi-permanent, or even permanent work, new risk factors emerge. For example, in many states, an employee who is injured at home while on the job may have a valid workers’ comp claim.
•Mitigation: For those employees who will not be returning to the office for the foreseeable future, consider conducting virtual assessments of their home offices and/or issuing ergonomic tips for modifying layouts or furniture to make their workplaces safer.
3. While we believe the pandemic will have little effect on health care premiums since the increase in COVID-19 treatment is more than offset by the deferral of elective procedures, certain policies may see increases in premiums and reductions in coverage, including:
Employment Practices – Before COVID-19, employers were already facing increased numbers of employment practice claims due a heightened focus on social justice. In the early days of the pandemic as businesses scrambled to respond, the Federal Government was quite lenient with Family First Coronavirus Response Act (FFCRA) violations. As things begin to normalize, we are seeing increased governmental scrutiny and enforcement. So as companies grapple with who returns to work, as well as manage employees who are dealing with virtual schooling or caring for sick relatives, there is no doubt that employment practices liability claims will only continue to increase. As a result, we are seeing increasing rates in Employment Practices Liability Insurance.
•Mitigation: Ensure your return-to-work and employment-at-will policies are vetted by your legal counsel, documented, rolled out clearly and consistently applied. Also consider reviewing or rewriting your employee manual to ensure it is up-to-date and consistently communicated to each employee. You should also ask your broker to step you through a fresh application for employment practices liability coverage—even if you already have it—to ensure you’re applying best-practices in your business.
Cyber – Cyber crimes were increasing at a dramatic rate prior to the pandemic and have only escalated since. With claims and payouts increasing, we anticipate cyber policies will become more expensive with less coverage.
•Mitigation: Shore-up network security while also ramping up training and enforcement of use of secure/encrypted network connections for all work-from-home employees. Also, ask your insurance professional to provide a new application for Cyber Insurance to audit your practices. Make sure your Cyber policy has the appropriate and broadest coverages.
If COVID-19 has taught us anything, it’s that “when” can look quite different than we ever imagined. By understanding the intricacies of your current coverages and taking an honest look at your risk profile, you can make the most of these challenging times.
Alper’s Team of Experts is here to assist you to ensure your business emerges stronger and better prepared for what lies ahead. Contact Chris Breck at CBreck@AlperServices.com or 312-867-7359 to help you plan for now through when.