Reed Smith Insurance Recovery partners John Shugrue, John Ellison, Amber Finch, Richard Lewis, and Matthew Weaver offer discussion and analysis on key issues relevant to businesses seeking, or evaluating whether to seek, coverage for COVID-19 losses. This webinar is available on demand and you can register here.
Here's a brief summary of the topics addressed in the webinar:
- Business interruption coverage and the physical loss/damage trigger (presented by Richard Lewis)
Business interruption insurance provides coverage when physical loss or damage adversely impacts a business, causing it loss. This insurance covers lost profit and continuing expenses for the period needed to repair or replace damaged property and is designed to do for the business "what the business would have done had there been no loss or damage to property." For COVID-19, the key issue for business interruption coverage is: Can the known or suspected presence of a virus cause "physical loss or damage" to property? For most businesses, it should generally be possible to make the requisite showing of physical loss or damage.
- Contamination, virus, and microorganism exclusions (presented by John Ellison)
In commentary, insurance companies have raised a variety of exclusions as potentially barring coverage for COVID-19 related losses. Some of the exclusions raised include exclusions for virus, bacteria, contaminants, mold, and pollution. Although there is significant diversity in exclusion wording across property policies, many policies contain standard virus exclusion language promulgated by the Insurance Services Office (ISO). The ISO made demonstrably false statements to state regulators in seeking approval for this language. Accordingly, virus exclusions may be vulnerable to challenge. Additional information about insurers' misrepresentations concerning virus exclusions is discussed in this article. Additionally, there are available challenges to the other forms of exclusion that insurers are raising that present viable responses to obtaining coverage even when they are asserted by your insurance company.
- D&O coverage for shareholder claims (presented by John Shugrue)
Directors and officers liability insurance (D&O) coverage typically applies to liability claims made against individual directors for breach of fiduciary duty and to claims made against the business for securities law violations. Potential claims implicating D&O coverage related to COVID-19 include shareholder claims for alleged failures to plan for, or respond to, the pandemic.
- Pollution, remediation, and decontamination coverage (presented by Matthew Weaver)
Coverage for pollution may be offered through first-party property insurance or various types of liability insurance. Policyholders must evaluate all of their insurance to understand the scope of coverage for pollution. Policyholders should also be conscious of the interplay between various coverages in developing an overall coverage strategy. Some circumstances or arguments that would be favorable when seeking coverage for business interruption, for example, may be unfavorable when seeking pollution coverage.
- Proposed legislative initiatives (presented by Amber Finch)
Several state legislatures have drafted bills that would require that business interruption insurance cover perils related to COVID-19. Insurers have raised the Contracts Clause of the U.S. Constitution as barring the proposed legislation. However, this constitutional challenge may be irrelevant in light of standard clauses for conformity to statute and liberalization that are included in most policies.
Register for the webinar
The full COVID-19 policyholder webinar is available is available on demand. We welcome you to submit questions to the presenters via the Q&A buttons accessible within the webinar platform.
Originally published June 17, 2020.
This article is presented for informational purposes only and is not intended to constitute legal advice.