News of the coronavirus first surfaced on December 31, 2019 when stories emerged out of China. This virus, originally named the Wuhan Corona Virus, originated from a live animal market in China, made the jump to human transmission, and started rapidly spreading nationally and globally. The highly contagious coronavirus began wreaking havoc during Chinese New Year celebrations with major impacts immediately felt during China's busiest travel time of the year. Major travel arteries were completely shut down, delaying travelers and halting transportation. As visions of Will Smith in “I Am Legend” started playing in our minds, the coronavirus concern turned global. The news flashed of quarantined cruise ships, families being stranded or separated due to potential exposure, and the coronavirus spreading to other countries. In February, the World Health Organization (WHO) officially named this disease Coronavirus Disease 2019, or COVID-19 for short. As organizations like the WHO focus on prevention, containment, and a cure, the potential ripple effect COVID-19 may have on businesses is only starting to surface.The impact COVID-19 will have on businesses is not fully known yet. The New York Times recently reported that the coronavirus is rattling the global economy and impacting all sectors including airlines, automakers, tech companies and manufacturers. Many domestic businesses rely on China and other impacted countries for raw materials, parts, labor, and manufacturing capabilities and they are currently assessing the exposure to their supply chain and looking for ways to mitigate disruption. Business owners are wondering if they have insurance coverage for disruptions to their manufacturing operations or supply chain related losses stemming from COVID-19.
From a risk management standpoint, be aware of the following insurance coverage implications:
- Most commercial property insurance policies contain an exclusion for losses caused by virus or bacteria.
- Most commercial property policies for business interruption and contingent business interruption require physical damage to the property for coverage to be triggered.
- A recent Business Insurance article suggests potential coverage if the interruption is due to civil authority or if the carrier offered an extension of coverage for interruption by communicable disease.
- In response to business owners concerns about a mandated closure of their business by a civil authority due to the presence or suspected presence of the virus, the Insurance Services Office (ISO) has developed two advisory, optional endorsements designed for use with ISO Commercial Property business interruption policies. The purpose of these endorsements is to provide limited coverage for business interruption caused by certain actions of civil authorities taken in an effort to avoid infection by coronavirus or limit the spread of such infection.
Recommendations moving forward:
- COVID-19 is considered an emerging issue and the insurance marketplace continues to evolve with respect to certain coverage offerings in response to the outbreak.
- Having a business continuity or disaster recovery plan in place is key to preventing and mitigating exposure to losses before they occur. This is a great time to review the plan, update an existing plan, or analyze your exposures and build a new plan.
- Confirm with your agent or broker if your policy contains exclusions for losses caused by virus or bacteria. They should also be monitoring for any new endorsements your carrier may try to add and be aware of new coverage endorsements available in the marketplace.
- Report all coronavirus related losses to your insurance carrier for review. COVID-19 and related losses will certainly test the policy language on many insurance policies and new litigation will likely result.
- As your business continues to feel the impact of the coronavirus, keep assessing your exposures, business continuity plan, property insurance coverage, and be in continuous discussion with a knowledgeable agent!
We will keep you informed as we learn more about the impact of the coronoavirus.
Below are links that we referenced that you may find useful:
- New York Times: https://www.nytimes.com/2020/02/21/business/coronavirus-global-business.html
- CDC: https://www.cdc.gov/coronavirus/2019-ncov/faq.html
- USA Today: https://www.usatoday.com/story/news/nation/2020/02/25/coronavirus-pandemic-can-outbreak-still-be-stopped/4865934002/
- World Health Organization: https://www.who.int/
- Business Insurance: https://www.businessinsurance.com/article/20200218/NEWS06/912333094/Coronavirus-supply-chain-losses-could-be-tough-to-recover-business-interruption-