by Marc Millison, Partner at Risk Averse Insurance
It is looking more likely that COVID-19 is going to have a long-term impact on our economy. Businesses are being forced to close their doors which could spell the end for many and be a major setback for most. Sustaining your business through this time is going to require tightening your belt and cutting costs where you can.
As a commercial insurance brokerage, we’ve fielded many calls these last few weeks from clients with a lot of questions about this situation. But they all boiled down to two basic questions:
Business Interruption & Civil Authority coverage
Most business owners want to know if there is any coverage in their policy to provide relief while they are shut down. Many news sites have been incorrectly telling business owners to file a claim for Business Interruption.
After review of numerous policy forms it is very evident that most, if not all, business and commercial property forms will deny coverage for business interruption as a result of the COVID-19 pandemic even if it is a result of a mandated shutdown.
The Insurance Services Office (ISO) provides standard coverage forms which are utilized by almost all insurance companies in the United States. The ISO Business Income and Extra Expense Coverage form coupled with the Special Form Causes of Loss and the Business owners Coverage Form do not provide coverage for lost revenue stemming from a coronavirus outbreak. ISO reinforced the standard policy language in 2006 following the SARS outbreak to make it very clear that loss as a result of virus & bacteria is not covered.
Because a virus is not a covered cause of loss, Business Interruption coverage will not be triggered. Because Contingent Business Interruption and Civil Authority coverages are extensions of Business Interruption coverage, they will not come into play either.
I do not want to offer false hope because it is very unlikely, but if you have an older policy form (one issued prior to 2006) you may have an argument for coverage if the policy does not include a specific virus exclusion. It is very important that all business owners contact an insurance professional to have their policy reviewed.
Your insurance professional should first review the property form for a virus exclusion. If it doesn’t exist, they should review the entire property policy for a specific virus exclusion. If neither are on the policy, it may be worth filing a claim. I still believe this is a Hail Mary, but it may be worth the time considering what’s at stake.
Workers Compensation is more straightforward. Illness caused by virus is covered if that illness was contracted at work. If an employee tests positive for coronavirus and they believe they contracted the virus at work, I would recommend reporting it to your workers compensation carrier immediately so it can be reviewed for coverage.
Do not put this off. As soon as an employee makes you aware that they believe they contracted the illness on the job, you should enter the claim and let the insurance carrier handle it. Delaying this could jeopardize coverage and leave you on the hook for expenses associated with the illness.
Measures that can be taken to reduce insurance costs
Most General Liability policies are rated on payroll or revenue. I would recommend reviewing those estimates with your broker and adjusting those figures as you see fit.
All Workers Compensation policies are rated on payroll. If you are on a pay-as-you-go plan, then all you need to do is report the lower payroll each period and you will be charged accordingly. If you have a traditional workers compensation policy, you should review your payroll estimates with your broker and make adjustments by endorsement.
The Commercial Auto policy is a bit trickier, but you could consider lowering the liability limits if all company-owned vehicles are off the road. However, if any vehicles were taken home by employees or are in use by managers or owners, I do not recommend lowering the liability limits. You could also remove Collision coverage from those vehicles if there isn’t a loan or lease involved. This is not something we would typically recommend, but this is an unprecedented situation, so the ultimate goal is protecting the short-term viability of the company. When you are allowed to get back to work, you should adjust the limits back to where they were.
Each insurance carrier is handling billing differently, but most are offering some flexibility, and have postponed sending any non-pay cancellation notices through the month of April. Unfortunately, there is not an option to suspend an insurance policy but if you are going to have an issue making your next payment, contact your insurance broker or carrier and see what they can offer.
Small Business Relief Package
I am a small business owner myself and fully understand the damage COVID-19 will almost certainly inflict on our business community. The US Congress has already approved measures to help us. If you haven’t discussed with your accountant or bank, you should do so immediately.
If you would like to be kept in the loop as this situation progresses, please email email@example.com and ask to be added to the “COVID-19 Relief” newsletter. It is our goal to provide all small business owners with the important details of this changing situation as it becomes available.
I wish you all the best of luck in getting through these trying times.