Coronavirus & Insurance: An FAQ for Business Owners

The novel coronavirus, aka COVID-19, has created widespread economic disruption at an unprecedented level across the world.

As doctors, scientists, and politicians race to find a vaccine—or even simply effective treatment—business owners who have been forced to temporarily shut down now face an uncertain future.

Some of the questions we hear at Pearl Insurance ask how business insurance can help employers during this critical time. Let’s take a look at some frequently asked questions about COVID-19 and how business insurance can help employers.

What would insurance cover if you temporarily shut down a business?

Generally, we would look to business income, or business interruption, insurance for relief when a business is not able to open their doors. Unfortunately, this is a property coverage and there has to be a covered loss—usually damage to the premises—to trigger coverage.

If there is not a covered loss, business income insurance will not provide a business owner any financial relief. A loss resulting from viruses capable of inducing illness or disease is not covered and is excluded by most carriers by endorsement.

Each scenario may be unique. Specific circumstances of the event will determine if a covered loss has occurred, which would warrant this kind of coverage.

Does insurance help cover operating expenses if employers get sick?

You may be eligible for benefits through your professional overhead expense policy if you are not able to work due to having or being exposed to COVID-19. In order to be eligible for benefits, you must submit medical documentation by a medical professional that your sickness (COVID-19 exposure) meets the policy’s definition of a disability and prevents you from performing your occupation.

A quarantine situation must also be supported with medical documentation. Recommendations from elected officials or Centers for Disease Control and Prevention (CDC) guidelines, office closure, or absences from work due to childcare issues do not qualify.

Many factors will determine if a claim will be covered, including the type of coverage and the terms and conditions of the certificate and policy.

What does insurance cover if you’re forced to shut down?

As mentioned above, it is unlikely that a business owner will be afforded coverage under most business owners or general liability policies for any type of loss related to the COVID-19 virus or resulting shut-downs. Some mitigating circumstances may include: endorsements, which add coverage for viruses; and loss of supply chain (suppliers not able to deliver vital material for operations).

If you have an employee with COVID-19, are you held responsible if others contract it?

If you were in violation of the law, or placed an employee in exposure to the virus deliberately and with intent to infect (malice), yes, you may be held liable. Otherwise, no, you cannot be held responsible.

What assistance is being discussed to help small business owners?

Any type of substantial relief will not come from commercial insurance. Local, state, and federal sources should be investigated. Low-interest loans for businesses affected are currently available from the Small Business Administration.

Would workers’ compensation help mitigate the cost for employees?

Two tests must be satisfied before any illness or disease—including COVID-19—qualifies as occupational and thus compensable under workers’ compensation:

• The illness or disease must be occupational, meaning it arose out of and was in the course and scope of the employment.
• The illness or disease must arise out of or be caused by conditions peculiar to the work.

So, does the coronavirus create a workers’ compensation exposure? The short answer is, not likely. Other than the fact that the coronavirus is currently garnering intense attention, in most cases it is no more occupational than the flu. It may be possible for employees to apply for unemployment insurance in the event they are not eligible for workers compensation.

However, if—and only if—it is proven the employee has an increased risk of contracting the virus due to the peculiarity of his or her job, the coronavirus would be considered occupational and thus compensable. Remember, compensability as an occupational illness requires something about the job that increases the risk of exposure and illness.

As with all situations, it is critical to review your individual policy as every policy and every claim is unique. Carriers will assess claims in accordance with the coverages the insured has in place and the facts presented. It is not possible to answer any hypothetical questions or claim scenarios regarding the coronavirus. If you believe you have a claim, please report it to the carrier as you normally would. Carriers are ready to follow their regular processes and protocols and engage you as needed.

This post will be updated as more information becomes available.

Dan Tharp is licensed in all states (except Alaska & Hawaii) and is the Vice President of Business Insurance Lines for Pearl Insurance. Dan has been assisting business owners in protecting their operations, customers, and employees for over 30 years. For questions regarding this blog post or any other insurance matter, he can be reached via phone at 800.447.4982 or email at dan.tharp@pearlinsurance.com.