Since being declared a global pandemic on March 11, the coronavirus (COVID-19) has caused widespread loss of life, disruption of global supply chains, uncertainty, and enormous business interruption losses. While the human toll is and will remain incalculable, insurance can play a vital role in helping your business recover financially.
We advise clients to take the following five immediate steps to maximize insurance recovery:
1. Identify Potential Insurance.
It is important to identify and evaluate all the potentially responsive insurance policies that your business may have. One obvious place to look for COVID-19 coverage is under commercial property insurance, which typically covers losses resulting from (among other things):
- Physical loss of or damage to covered property,
- Business interruption,
- “Contingent” business interruption (if your business suffers losses due to COVID-19 impacts on a supplier, customer, or other business-critical third party), and
- Orders of “civil authority”—in the case of COVID-19, governments in many impacted areas have announced defined prohibitions on certain business operations, while prohibitions on social gatherings also impact businesses that depend on such gatherings (such as restaurants and entertainment).
With respect to any of the above coverages, keep in mind that any “direct physical injury” requirement in your policy may be satisfied if COVID-19 infiltrated business premises, or the property suffers a loss of use or functionality, among other circumstances.
Other types of insurance that may respond to COVID-19-related losses and liabilities include commercial general liability, director’s and officer’s liability, errors and omissions, event management and event cancellation coverage.
2. Provide Timely Notice.
Insurance policies typically contain notification provisions stating that the insured must provide notice within a certain time frame, often “as soon as practicable” after the insured becomes aware of a loss. Absent a compelling reason, you generally should provide prompt notice under all potentially applicable policies.
3. Keep Good Records.
A key step for any business is to carefully document losses. Identifying and keeping complete and accurate records relating to business income loss (including lost sales and revenues) as well as any extra expenses that have been incurred, will help maximize overall insurance recovery. Claim preparation expenses may also be covered under the insurance policy.
4. Consider Insurance Counsel.
Experienced insurance recovery counsel can assist you in evaluating your insurance claim, considering the impact of potentially applicable law, presenting the claim in a coverage-promoting manner, and maximizing recovery across your entire insurance portfolio.
5. Don’t Take “No”.
The devil is in the details as facts crystallize in a claims setting. Policyholders who refuse to take “no” for an answer may be able to secure coverage if they effectively and persistently pursue their claim for coverage.
Insurance is a valuable asset. Although your business may suffer losses relating to COVID-19, you may also have substantial financial protection through your insurance. Careful and proactive attention to insurance coverage considerations could be the key to restoring business operations and recouping losses.
Note: This bulletin is for general use and should not be construed to provide legal advice as to particular factual situations.
