Now that coronavirus has spread to U.S. residents without known exposure to the disease, employers across the country are on high alert. And rightfully so.
For U.S. employers, especially restaurants and hotels who serve thousands of customers whose previous interactions are unknown, the issue is no longer if coronavirus will become a business issue, but how to prevent it from becoming one—and which aspects of your business will be affected most.
Coronavirus and Worker’s Compensation
If an employee tests positive for coronavirus or causes the virus to spread to other employees, your organization will want to file a worker’s compensation (WC) claim.
Employers will want to file a WC claim due to coronavirus if an employee contracts the disease while on the job, including hourly workers or independent contractors. The employee(s) will need to prove that another employee had the virus and the only way they were exposed to the coronavirus was through that contact. It cannot be assumed that the insurance company is going to accept and pay WC benefits for a claim for COVID-19 exposure. There will be an investigation, and employers who have taken steps to limit the exposure to their employees will be helping their insurance company in determining if a claim is compensable.
Of course, if the virus spreads to multiple employees, the WC claim, if found to be covered, will likely be considered a catastrophic loss or exposure claim, kicking in full policy limits. WC policies will typically cover lost time, permanent disability, medical expenses and a death benefit in these scenarios.
Coronavirus and Business Interruption/Supply Chain Issues
The most significant fallout of the coronavirus epidemic for restaurants is the business interruption it’s causing. If coronavirus has affected your supply chain, i.e. your organization is unable to ship or receive products necessary to your daily operations, you are not alone.
Unfortunately, Business interruption (BI) policies don’t typically cover epidemics and instead, require a trigger like a degree of damage done to the insured’s property. Some businesses have been able to argue that contaminated items such as HVAC systems, assembly lines and such could trigger property damage/business interruption if the contamination brings the insured’s business to a stop. Contamination making property uninhabitable or otherwise unfit for use could qualify as property damage.
When endorsed onto the policy, contingent business interruption (CBI) coverage may apply to loss due to the suspension of the insured’s operations caused by direct physical loss of or damage to dependent property, such as the premises of a key supplier, contractor or customer. There does not need to be damage to the insured’s property.
Policy reviews for BI or CBI coverage include provisions relating to mitigation costs or expenses to avoid losses that might be covered under the policy if steps not taken, definition of property damage and exclusions for virus, bacteria, pollution.
It is critical to talk to your insurance broker about your BI and CBI policy coverage to find out what parameters, limits and exclusions are in place and what you should be looking out for ahead of a potential claim.
Before going to your broker, gather the answers to the following questions:
- 1. Are your suppliers’ premises/workplace/production lines/HVC or equipment, contaminated?
- 2. Are employees unable to get to work because of illness, quarantine or inability to commute?
- 3. Are suppliers unable to produce goods due to government order? When might they be back in business?
- 4. Do they have insurance or other type of assistance for recovery?
What employers can do right now
As the number of U.S. coronavirus cases continues to rise, now is the time for business owners and operators to prepare themselves with the following crucial practices:
1. Regular hygiene is a priority. Food service employees need constant reminders. Hang signs around the restaurant, especially in common staff areas, reminding employees to wash their hands frequently and cover their faces while sneezing and coughing. Mandate that employees who aren’t feeling well stay home and seek immediate medical attention.
2. Create an emergency preparedness plan. Create a business continuity, emergency preparedness and even pandemic reaction plan if you don’t already have one. Consider business interruption issues specific to your restaurant and location(s) and establish procedures that can be enacted on a moment’s notice.
3. Take precaution with sick employees. Employees who may have been exposed to the virus should be sent straight to a doctor to be tested, even before returning home or coming to work. Require clearance for any exposed employees before returning to work. Let the entire staff know they have been tested, and the result was negative.
4. Report Claims Immediately. Time is of the essence. Exposure and potential claims need to be submitted as early as possible. This will allow for a thorough and efficient review of the case and coverage scenarios.
5. Review Policies. Working with your broker, a careful analysis of current policies, both primary and excess, will reveal whether an event like this is covered by the insuring agreement, and whether any exclusions apply. Many factors will determine if a claim will be covered, including the type of loss, coverage and the terms and conditions of specific policies.
Unfortunately, the coronavirus outbreak is now on U.S. soil, and therefore has the potential to affect every domestic business, whether or not they have employees traveling overseas. It’s time to prepare for a potential business interruption or employee quarantine issue ahead of any potential liability. Start planning for the unexpected today.
Thomas Steinbrenner is a Senior Vice President at Hub International. He has the unique background having held insurance company management positions in claims, underwriting, and sales.
