Do Not Just Assume No Coverage for COVID-19 Losses and Claims; Review Your Policies Carefully

Despite what you may have heard or think, do not just assume that there is no insurance coverage for COVID-19-related losses and claims. The risk, and potential cost, of making such an unfounded assumption is just too great to ignore.

As the World Economic Forum reports: “While much of the world’s attention is rightly focused on the human toll of COVID-19…the economic toll of the outbreak also has potentially disastrous implications.” As of late April 2020, The Heritage Foundation, for example, calculated that “[s]tates representing 95 percent of the economy are subject to statewide public health-motivated shutdowns[, and u]nder lockdown orders lasting eight weeks, economic output could fall by as much as $2 trillion…..”

Seemingly every industry – from retail to entertainment to construction – as well as almost every so-called “non-essential” business across the country, has been affected in some way by the current pandemic. For example, many businesses have been required to close, costing them weeks, if not months, of revenue.

Insurance – specifically, business interruption coverage and civil authority coverage – may be available to offset such COVID-19-related first-party losses.

Insurance companies, however, are already working to dissuade policyholders from seeking coverage.  In “a letter to property insurance policyholders in New York,” Travelers, for example, took the position that its business insurance property policy does not provide “coverage for cancellations, suspensions, and shutdowns that are implemented to limit the spread of the coronavirus.” The insurer argued further that “[t]hese are not the result of direct physical loss or damage.” Going further still in that same letter, Travelers, citing “the exclusion for losses resulting from a virus or a bacteria,” stated: “Even if there has been direct physical loss or damage to property, your policy contains a number of exclusions that are likely to apply to business interruption losses.”

Not so fast. Initially, contrary to Travelers’ position, viral contamination of property may in fact constitute direct physical damage. Furthermore, in any event, not all property insurance policies read the same. And, further still, not all property insurance policies contain a so-called “virus exclusion.” As such, it is important to carefully review the specific language in your specific property insurance policy.  Do not just take the insurance industry’s self-serving “no-coverage” representations at face value. In fact, even if your policy includes a “virus exclusion,” an argument potentially can be made that such an exclusion is against public policy and/or unconscionable. Still other arguments will be addressed through coverage litigation, which has already started to be filed.

In addition to property damage and government-mandated shutdowns, the novel coronavirus outbreak also has spurred numerous lawsuits, ranging from negligence claims to securities litigation, against many different types of businesses – from cruise lines to senior-care facilities to vaping companies — across the United States. Coverage for such third-party claims may be available under, for example, commercial general liability or directors and officers’ insurance policies. Again, policy language matters, and all policyholders should review their own specific insurance policies.

Further still, additional coverages may also be implicated by the current pandemic. For example, cyber liability coverage may be more important now than ever. The San Francisco Examiner reported that cyber-attacks have risen dramatically since the start of the pandemic. Event cancellation insurance has also taken on increased significance in the wake of the pandemic.

If you have any questions regarding insurance coverage related to COVID-19 losses and claims, or any other insurance-coverage related matter, please contact Michael H. Sampson. Leech Tishman’s Insurance Coverage Group is available to assist businesses in reviewing their policies and putting their insurers on notice and has a suite of srevices specifically designed to assist policyholders during this difficult time. To read more about Insurance Coverage for COVID-19-Related Losses And Claims, please click here.

Michael is a Partner at Leech Tishman and Chair of the firm’s Insurance Coverage Group. He is also Co-Chair of Leech Tishman’s Cannabis Group and a member of the Litigation Practice Group. Michael is based in the Pittsburgh office and can be reached at 412.261.1600 or msampson@leechtishman.com.

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Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York, Sarasota and Wilmington, DE.