At the precipice of the issue for employers and business owners is the liability they may be required to shoulder if essential workers contract the virus on the job, spread it to others or bring it home to their families. Could the business be liable for a workers’ compensation (WC) claim?

The answer is: it depends. The clarification of insurance coverage remains largely undecided as it relates to Workers Compensation. Right now, the answer is almost exclusively at the carrier’s discretion. Application of coverage eventually “may” be decided by state and federal courts, or government intervention.

Workers Compensation coverage is subject to each state’s jurisdiction. Currently, a few states – Kentucky, Washington State, Michigan and Colorado have officially ruled on WC and COVID-19. These states will provide Workers Compensation benefits or wage replacement to healthcare workers and first responders during the time they are quarantined after being exposed to the virus on the job. Washington State Workers Compensation coverage will pay for medical testing, treatment expenses and provide indemnity payments for those who cannot work, while the Kentucky Employers Mutual Insurance Co., said they will pay wage-replacement benefits for first responders or healthcare employees while in quarantine.

For non-healthcare workers and general employees in every other state, Workers Compensation coverage remains a moving target and compensability will be based on the work of each individual class, and ultimately determined by the carrier and individual state. It has to be in the course and scope of employment.

In order to put your business in the best possible position ahead of a decision about a Workers Compensation claim, adhere to the following best practices.

Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of WC coverage claims are resolved.

Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier.

Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.

Even though questions pertaining to how the General Liability policy will respond to COVID-19 has been limited, it is still important that it is addressed. Legal Liability Required To lead into the CGL’s response to the coronavirus, one key fact must be understood. If there is no legal liability, coverage is not triggered in the CGL and the policy will not respond. Legal liability exists when: 1. The wrongdoer is found guilty of “Negligent Conduct” (meaning they breached a duty owed to the injured party);  2. The injured party suffers actual damages; and 3. The wrongdoer’s “Negligent conduct” is the proximate cause of the injury or damage.   Far more than these triggers are required to ultimately establish legal liability, but such detail is not the focus of this article. Was There an “Occurrence”? A second requirement contained within the insuring agreement plays a role in the CGL’s response to any injury supposedly arising from the coronavirus – the injury must qualify as an “occurrence” before the policy responds. The CGL form reads: b. This insurance applies to “bodily injury” and “property damage” only if: (1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”   Within the CGL an occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Is contracting a virus an occurrence within the policy form? To decide if this qualifies as an “occurrence” the question must be asked, is passing along a virus an accident? Maybe, but there are too many variables are involved to provide a definitive answer. As part of the question of an “occurrence,” the injured party has to prove that the virus was contacted at the insured’s premises or arising from its operations. Given the specifics, this might be almost impossible. For sake of the overall discussion, assume making another person sick qualifies as an “occurrence” in the CGL, and that the person is able to prove that his/her only exposure was at the insured’s locations or a result of the insured’s operations.  If the insured is legally liable if there is an occurrence as defined in the CGL and if the exposure can be narrowed down to the insured, the next step is to look for exclusions within the CGL. Are There Any Exclusions? Review the exclusions in the unendorsed CGL and only one exclusion could possibly negate coverage for spreading the coronavirus to members of the public, exclusion 2.a. Expected or Intended Injury. For example, if the insured requires an employee to continue working or come to work who is known to be infected, spreading the virus should be expected (even if not intended). No coverage due to the exclusion. If, however, the expected or intended injury exclusion does not apply, there do not appear to be any other exclusions applicable to the spreading of the coronavirus. Although some enterprising claims person would surely try to use the pollution exclusion. This leaves us with the impression that the CGL may provide coverage for infecting a third in certain circumstances. But this is not necessarily true. A Common (Ubiquitous) Exclusionary Endorsement Even if an incident leading to bodily injury from coronavirus clears all the required hurdles (the insured is legally liable, the incident qualifies as an occurrence, the injured party can prove the exposure is the from the insured’s actions, and the claim is not hindered by the expected or intended injury exclusion), there is still one roadblock – an exclusion common to most CGL policies – the CG 21 32 05 09 – Communicable Disease Exclusion. Undoubtedly the question to be answered is, does a virus qualify as a disease? In a “roundabout” way, yes. It’s not the virus that causes harm, it’s the disease that results from the virus. The immune system destroys some viruses before they can cause any harm, but some viruses overpower the immune system and lead to sickness (disease). When the CG 21 32 is attached, there is no coverage for the transmission of the coronavirus and the resulting sickness (disease). How is the CGL Going to Respond to the Coronavirus? Without overstating the reality, it seems rather unlikely that a CGL policy will ever pay a claim arising from the coronavirus. The facts may negate any possibility that the insured is legally liable for spreading the virus/disease. And even if the insured is legally liable, does spreading a virus actually qualify as an occurrence as defined in the policy? If these two insuring agreement conditions aren’t met, there is no need to go any further into the coverage form because there is no coverage. In order to put your business in the best possible position ahead of a decision about a CGL claim, adhere to the following best practices. Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of CGL coverage claims are resolved. Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier. Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.

COVID-19, better known as the Coronavirus, originated in Wuhan, China. According to the Centers for Disease Control (CDC), the Coronavirus is thought to be transmitted person-to-person through “respiratory droplets produced when an infected person coughs or sneezes … these droplets can land in the mouths or noses of people … or possibly be inhaled into the lungs.”

Major operations have slowed or even ceased operations, travel is at a bare minimum, and supply chains are severely disrupted in many industries. In reality, the ultimate global economic impact of this virus will remain unknown for many months after the danger and fear have passed.

ASZ continues to receive calls and emails nearly every day regarding the insurance implications of this virus, and the most common question relates to business income, specifically: “Is there business income coverage if a governmental authority (civil authority) requires businesses to close?”

Before business income responds there must be damage to property leading to the cessation of a business. This requirement applies to business income dependent property losses (supply chain) and civil authority losses covered by business income policies. Additionally, there is a specific property exclusion applicable to viruses that may (generally will) apply. This is true of “standard” business income forms; there may be some proprietary forms that respond, but these are rare.

In response to the Coronavirus, and because many, if not all policies contain a virus exclusion, the Insurance Services Office (ISO) created two business income endorsements as a specific response to the Coronavirus:

• Business Interruption: Limited Coverage For Certain Civil Authority Orders Relating To Coronavirus ─ Edition February, 2020; and
• Business Interruption: Limited Coverage For Certain Civil Authority Orders Relating To Coronavirus (Including Orders Restricting Some Modes Of Public Transportation) ─ Edition February, 2020

Coverage provided by both endorsements:

• Begins immediately upon suspension of the insured’s operations (there is no waiting period).
• Extends for the time period specified in the schedule.
• Is provided on an annual aggregate basis limited to the amount stated in the Schedule.

Both endorsements:

• Provide limited coverage when/if there is a suspension of operations due to closure or quarantine at the insured location ordered by a civil authority attempting to avoid or limit the spread of infection by a Coronavirus.
• Extend dependent property coverage (contingent business income) for named locations, if the policy includes dependent property coverage, when there is an interruption in the insured’s business due to closure or quarantine to avoid or limit the spread of infection by a Coronavirus ordered by a civil authority at the dependent property.
• Apply to income loss suffered by insureds operating from a vehicle or mobile equipment, if the policy is endorsed to recognize such vehicle-based operation.

Lastly, both endorsements specifically exclude:

• Intentional action by any person, group, organization or sovereign state to introduce or spread the virus;
• Costs to clean, disinfect, dispose of or replace any property;
• Costs to disinfect or dispose of any bodily fluids or waste materials;
• Costs of testing for or monitoring the presence or absence of the virus;
• Loss or expense due to fear of contagion, e.g., when customers, tenants or vendors avoid a part of the insured’s premises not under quarantine;
• Loss or expense related to absence of infected workers or those suspected of being infected; and
• Any fines or penalties.

Even BI policies with a pandemic endorsement(s) are being reviewed by carriers at this time due to other exclusions in those policies that may prohibit coverage for COVID-19. The mandated closure of businesses has not yet altered the coverage position set forth by these policies.

In order to put your business in the best possible position ahead of a decision about a BI claim, adhere to the following best practices.

Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of BI coverage claims are resolved.

Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier.

Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.