Coronavirus Task Force Report, Part IV: Insurance might help your biz.

By Logan Elia, Rose Law Group partner, litigator involved with the RLG Coronavirus Task Force

A lot less is happening after this past weekend.  On Sunday, the CDC recommended that events of 50 or more people be cancelled or postponed for the next eight weeks.  In response, Governor Doug Ducey released a statement ordering all Arizona schools to close beginning March 16 through March 27.  The NBA and MLB suspended play.  The Pac-12 conference cancelled all sports competitions.  Other sporting events are cancelled as well.  American Airlines announced that it will suspend all but three long-haul routes and ground substantially all its wide-body jets.  The St. Patrick’s Day Parade in Phoenix was cancelled for “inclement weather.”

As events continue to be cancelled, businesses of all types can reasonably expect to see a reduction in commerce.  Businesses should review whether they have insurance in place to help defray the cost of this disruption.  Most businesses carry some form of business disruption insurance as part of their overall comprehensive insurance or property/casualty policy.  After the SARS outbreak in 2003, some carriers amended polices to exclude losses due to communicable diseases.  Others did not.  Some policies include contingent business interruption coverage to compensate for loss of commerce due to supply chain interruptions or the closure of a nearby business that drives customers (for example, a restaurant adjacent to a ballpark).  What coverage any insurance provides is governed entirely by the language of the policy itself.

In addition to the risk of reduced commerce, COVID-19 may present liability risks to businesses.  Arizona courts will almost certainly see claims that businesses – or their directors and officers — failed to exercise reasonable care in guarding against, or warning of, the risk of exposure to coronavirus.  Major businesses including Marriott International, SRP, Capital One, Citi, and American Airlines are taking steps to actively communicate with their customers about the risks of coronavirus.  Depending on the specific industry and claim, businesses may be covered for liability by commercial general liability (“CGL”) insurance policies, errors and omissions (“E&O”) insurance, directors and officers (“D&O”) insurance policies, or workers’ compensation insurance.

Nearly all insurance policies contain provisions forfeiting coverage if an insured fails to timely tender a claim.  Therefore, businesses are well advised proactively audit their insurance coverage to know what losses may be covered if they are timely claimed. 

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