As businesses continue to feel the effects of COVID-19 on their operations and revenue, many are looking to their property and casualty coverages for relief. While some claims have been denied outright, many more are still under review, and will likely head toward litigation before resolution. Here’s what you need to know about each line of coverage ahead of your next renewal.
Business Interruption Insurance
Unprecedented business closures have led to a growing number of Business Interruption (BI) claims under the Business Income/Extra Expense (BI/EE) coverages contained within a Commercial Property Policy. BI/EE coverages include shutdowns imposed by a civil authority, but these coverages are designed to cover direct physical loss or damage to property, often caused by fire, lighting, wind, hail or theft and are not intended to respond to a virus or pandemic which fail to meet the definition of direct physical loss. For this reason, claims that aren’t denied immediately are likely to play out in various forms of litigation. Insurance carriers are also keeping a close eye on various state legislation that could require carriers to pay for BI/EE claims, regardless of the policy language.
For 2020, this means carriers who include BI/EE as part of their offering will likely place additional scrutiny on requested limits and may revise their renewal offerings. For example, businesses that currently hold BI/EE policies with expiring limits of $20M, may be offered as little as $5M in coverage at renewal. If they didn’t already, renewal policies will likely carry a virus/pandemic exclusion to further clarify their coverage position.
Best Practices: Be prepared going into your BI/EE renewal. Work with your broker to determine the best strategy in approaching the carrier. Consider your BI/EE risks moving forward and determine the precise amount of coverage you really need leading into renewal negotiations.
Workers’ Compensation Insurance
As businesses begin to bring non-essential employees back to work, there is a potential for a different type of Workers’ Compensation claim to arise. Part B of a Worker’s Compensation policy, known as “Employers Liability” covers employers should an employee feel they were forced to work under unsafe conditions and/or without the proper training or personal protective equipment.
Part B is traditionally invoked when an employee was exposed to an unsafe condition and lost a limb or life and alleges the employer has some form of negligence. In dealing with COVID-19 return to work exposures, if employees are required to work without proper social distancing or provided proper personal protective equipment (PPE) and are exposed to COVID-19 the employee may have a pathway to allege negligence on the part of the employer and trigger the Employers Liability coverages.
Claims made under Part B of a Workers’ Compensation Policy tend to be drawn out and litigated for years. Businesses involved in Part B claims will need to hire a specialized attorney. While Workers’ Compensation Employers Liability cases are rare, they are likely to increase as the U.S. workforce returns to their operations.
Best Practice: Before bringing employees back to work, implement OSHA’s Guidance on Preparing Workplaces for COVID-19 and document all safety practices/meetings while making all forms of personal protective equipment available to employees at all times. Work to ensure proper Workers’ Compensation claims reporting and monitoring procedures and keep all employees health information around COVID-19 highly confidential.
Employment Practices Liability Insurance
An employer who treats certain employees unfairly as it relates to their fear of the COVID-19 work environment and/or an ongoing workers’ compensation claims could be exposed to discrimination lawsuits. These allegations could trigger a business’ Employment Practices Liability Insurance (EPLI). In certain allegations such as class action lawsuits, a business’s Directors and Officers (D&O) coverage may also be triggered as well.
Best Practice: Make sure you have appropriate limits on your EPLI and D&O policies. Make sure you have a competent HR team who understands the importance of safety compliance and is prepared to deal with work related risk, safety and special accommodation requests from employees. Be sure to have access to an attorney that is approved by the EPLI carrier and specializes in employment related claims.
The COVID-19 crises have led to employees working from home, vastly increasing the attack surface available to criminals. When employees use company laptops or take-home company desktops, they are still often outside of the defensible perimeter of the firm. When they use personal computers or mobile devices for company use, the problems compound because Wi-Fi networks, personal devices, and software have neither adequate hygiene nor corporate controls, supervision, and licenses. When they seek information about the crisis, they run the gamut of thousands of malicious mails, fraudulent websites and disinformation campaigns. As a result, individuals and business are rapidly becoming victims of interruption, fraud, privacy breaches, and theft of monies as well as sensitive data.
Although cyber insurance can cover many of these perils, some cyber insurers require written policies for “Bring Your Own Device” (BOYD) and “Work from Home” (WFH). We expect that cyber markets will begin to address these areas at annual renewals.
Best Practice: We encourage policyholders to consult with a HUB cyber specialist to ensure that current policies and procedures measure up to the new threatscape and to potential new underwriting questions.
For the last few years carriers have been increasing premiums and reducing limits on umbrella/excess insurance policies, due to recent global loss trends and increasing jury payouts. Unfortunately, this does not yet take into account the potential pressure new COVID-19 lawsuits will have on the market.
Best Practice: If your business needs an umbrella/excess tower (i.e. $50M limits) it is likely you will need more layering/carriers than in years past. Work with your broker to develop limits benchmarking and devise the best strategy before going out to market.
Conduct a Pre-Renewal Assessment and Create a Market Strategy
Businesses facing premium increases and limit reductions are strongly encouraged to conduct a thorough pre-renewal analysis with your broker. Review your limits on each policy, understand your current and potentially heighted exposures during the COVID-19 pandemic. Develop a strategy to deal with underwriting questions related to the impact of COVID-19 on your operations and financials to ensure the best possible outcomes at renewal.
Contact HUB Risk Services to learn how to develop a business continuity plan that will help protect your business and employees from the unexpected. Get the latest information, guidance and resources on Coronavirus (COVID-19) to help you protect what matters most on our Coronavirus Resource Center.