Insurance Coverage and COVID-19
Updated: Nov 5, 2020
By Nicole Cook
This article is not a substitute for legal advice. See here for the site’s reposting policy.
Insurance might be the last thing you’re thinking about right now as you scramble to figure out how to cope with the impacts of COVID-19. But now is exactly when you need to be doing all you can to put your farming operation in the strongest position possible to maximize any potential insurance recovery. This is especially true if federal or state assistance is not a viable option for your farm either because you don’t qualify for the assistance or you don’t want to take on more debt. Whether your business is experiencing economic losses due to disruptions caused by COVID-19, you’re making significant changes to how you run your operation in order to work around those disruptions, or you’re renewing coverage, you might risk losing coverage if you forget or put off doing these things.
Find Out What Type Of Insurance You Have
The novel coronavirus 2019 pandemic (COVID-19) has disrupted supply chains, sales, and entire global industries. As a result, all businesses should look to see if they have insurance that covers lost business income as well as expenses related to cleaning, sanitizing, decontaminating, etc. Whether you have insurance for your business’ losses depends on what the insurance contract says. If you haven’t read through your insurance policy or policies in a while, find them, grab a big cup of coffee, sit down and read them closely.
Examples of the types of coverages that may provide indemnity for losses from the coronavirus outbreak include business interruption, contingent business interruption, and civil authority provisions, commercial general liability (CGL) coverage, directors and officers (D&O) coverage and errors & omissions (E&O) coverage.
Business interruption claims are first-party claims that typically require physical loss of or damage to property in order for coverage to apply. In the case of COVID-19, some policyholders might make claims that contamination by the virus rendered the insured property temporarily or permanently unusable and was therefore a physical loss of the insured property.
For contingent business interruption coverage the loss would have to be caused by damage to or disruption of an insured’s supplier, customers or key business partners.
Some property insurance policies provide business interruption coverage where lost earnings are the result of an order of a civil authority prohibiting access to a property of an insured or insured’s supplier. Typically, however, the reason for the civil authority to prohibit access to the premises is because the property sustained physical damage. (See business interruption above)
CGL insurance provides a defense to claims asserted by third parties for bodily injury or property damage. CGL coverage might be implicated if there are third-party bodily injury claims resulting from exposure to harmful conditions or failures to exercise reasonable care in guarding against the risk of exposure to the virus.
For some companies experiencing a drop in share price, shareholder suits may follow, which may trigger coverage under D&O and E&O insurance policies.
Check For Exclusions
Insurance policies commonly contain exclusions for pollution and/or contamination. Usually, the term “pollutant” or “pollution” is defined in the policy, but it may not specifically reference a virus. Other policies may not define the terms “contaminant” or “contamination.” When the policy doesn’t define pollutants or contaminants, some courts have said that viruses are not considered pollutants and thus not excluded from coverage under the terms of the policy. In the wake of Severe Acute Respiratory Syndrome (SARS), Ebola virus, and Zika virus outbreaks, however, some insurers began to specifically include mold, bacteria, and viruses as listed “pollutants.” Read through the exclusions in your policy before you make a claim.
Pay Attention To Requirements For Notice, Efforts To Minimize Loss, And Cooperation With Adjusting The Claim
All insurance policies include strict requirements about (1) when and how to notify the insurance company about a claim, (2) the policy holder’s responsibility to make reasonable efforts to minimize the loss (e.g., find alternative buyers for farm products), and (3) the insured’s responsibility to cooperate with the claim investigation. Failure to comply with any one of these requirements may lead an insurer to dispute the claim. Make sure you understand your obligations under the terms of the insurance contract, particularly about what you have to do to notify the insurance company about a claim and how soon after the loss you have to do it. Failure to comply with the terms of the contract could waive your right to seek indemnity under the policy.
Pay Attention to How Your Claim Is Handled
If you do make a claim, be sure to keep copies of everything that you submit to the insurance company to support your claim, and take notes on every conversation that you have with your carrier. Even during the best of times, adjusters make mistakes, just like everyone else. Insurance companies have already received tens of thousands of claims related to COVID-19, so be prepared to resend information that might get lost and to make sure that your adjuster is keeping you notified of the progress of your claim.
Notify Your Carrier If You Change How Your Business Operates
If you are making significant changes to how you are running your farming operation, regardless of whether it’s because of COVID-19, be sure to let your insurance agent or the insurance company know. For example, if you were running a pick-your-own operation and now because of COVID-19 you are making deliveries of farm products and you or your employees are using personal vehicles to make those deliveries, your carrier may need to evaluate coverage limits and associated premiums and apply term limits for the new coverages that are needed to cover the changes in risk.
Notify Your Carrier If You Can’t Afford To Pay The Premiums For A While
Another impact of the disruption caused by COVID-19 might be that you can’t afford to pay the premiums on your current policies. Under normal circumstances, failure to pay premiums is a reason that insurance companies can cancel policies. If you can’t make the insurance premium payments as a result of the impacts of COVID-19, however, contact the insurance company to ask if they are offering any extensions or other accommodations for their policyholders who have been impacted by COVID-19. If you’ve contacted your insurer and haven’t been able to get any information or assistance, the Maryland Insurance Administration is requesting that you complete a complaint form on the agency’s website. The Maryland Insurance Administration is the consumer protection agency that regulates insurance companies that sell insurance policies in Maryland.
Insurance companies learn very quickly how catastrophic events like a global pandemic affect their reserves, and they adjust their policies accordingly. Your carrier may (and likely will) add new exclusions or broaden existing exclusions to specifically exclude coverage for losses caused by “disease” or “viral infections,” etc. Never assume that the terms of your policy are the same just because you renew your policy. Be sure to ask whether there have been any changes made to the coverages and also the exclusions, and read through the terms of the policy both before you purchase the policy and after to make sure the policy provides the coverage protections that your business needs. If not, keep shopping.
Lawmakers have urged insurance companies to recognize losses from the coronavirus as part of business interruption coverage, and lawsuits have already been filed seeking declarations from the courts that the government-ordered shutdowns are covered business interruption losses, but unless or until those matters are resolved, you need to understand what’s covered and what’s excluded from coverage under your insurance policy, and exactly what you need to do in order to properly file a claim. Review your policy and then talk to your insurance agent or broker and experienced coverage counsel to determine whether and what losses are covered under your policy, what adjustments you might need to make to ensure you don’t lose coverage, and what your coverage needs will be in both the near and long term. And if you have a complaint about an insurance provider, a public adjuster or an insurance adviser, remember that you can file a complaint online with the Maryland Insurance Administration. Just click here to go the agency’s website.