The latest–and for many businesses, the most significant–fallout to the coronavirus pandemic is the business interruption it's causing.
It is still unclear whether employers will be held liable for workers' compensation claims associated with COVID-19. At the same time, supply chain issues are already threatening business interruption. Find out what you can do to prepare right now for tomorrow's unknown.
It is no longer if COVID-19 will become a business issue, but how to prevent it from becoming a significant one, and which aspects of an organization will be most affected. From worker's compensation claims to supply chain interruption, business have more questions than there are answers. Here, we attempt to answer some.
When is COVID-19 a worker's compensation claim?
Generally, when an employee catches the flu from someone at work, it is not covered under Workers Compensation insurance. Those claims have been found not to be compensable and were denied. However, in the case of COVID-19, the answer is not very clear.
Instead, if an employee tests positive for COVID-19 – regardless of how they caught the virus – and/or if an employee causes the virus to spread among your staff or patients, your organization needs to file a worker's compensation (WC) claim on behalf of all infected workers.
In order for the claim to be covered, the employee(s) will need to prove that he/she was not only infected with the virus via another employee, but the only way they were exposed COVID-19 was through that contact. It cannot be assumed that the insurance company will pay out WC benefits for COVID-19 exposure. There will be an investigation, and employers who have taken steps to limit the exposure to their employees will be working with their insurance company to determine if a claim is compensable. The contraction has to be within the "course and scope of employment."
WC policies typically provide benefits for lost time, permanent disability, medical expenses, and even death benefits when an injury is found to be caused by a work exposure. Reach out to your broker today to review your WC policy details ahead of any issues to determine the best course of action should residents or employees begin to show symptoms or claim they may have been exposed to the virus at work.
Are business interruption/supply chain issues due to COVID-19 covered?
The latest–and for many businesses, the most significant–fallout to the coronavirus pandemic is the business interruption it's causing. For many senior facility owners and operators, the epidemic has affected their supply chain, i.e. organizations can no longer ship or receive products necessary to their work, or it has caused other significant personnel or materials delays.
A variety of issues related to coronavirus can cause business issues. From the inability to source materials necessary for your business to shortage of critical care supplies or even remote working complications. Unfortunately, Business interruption (BI) policies don't cover pandemics. Instead, they require a physical trigger like a degree of damage to the insured's property for coverage to kick in.
When endorsed into a policy, contingent business interruption coverage (CBI) may apply to losses due to the suspension of the insured's operations caused by direct physical loss of or damage to a 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 to qualify for CBI coverage. Rather, the insured would have to show covered property damage at the dependent property location and at this point, contamination may not be enough to satisfy those requirements.
It is critical to talk to an insurance broker about your BI and CBI policy coverage to find out what parameters, limits and exclusions for virus and pandemics are in place and what to look out for ahead of a potential claim.
What employers can do right now
So, you've closed your non-essential offices and moved most employees to remote work. Now is the time to prepare your internal systems and policies to further minimize liability. Consider the following best practices:
1. Author an emergency preparedness plan. If you don't already have one, name a working group of employees from across your organization to create a business continuity, emergency preparedness and even pandemic reaction plan. Consider business interruption issues specific to your business and location and establish procedures that can be enacted on a moment's notice.
2. Report claims immediately. Time is of the essence. Exposure and potential claims, whether WC or BI, must be submitted as soon as possible. This will allow for a thorough and efficient review of the case and all coverage scenarios. Like any other local state of emergency, as the COVID-19 pandemic spreads, claims have the potential to get backed up.
3. Review policies. Conduct a careful analysis of your current policies with your broker, both primary and excess. This analysis will reveal whether an event like this is covered by your insuring agreements, and which exclusions apply. Many factors will determine if a claim will be covered, including the type of loss, the type of coverage and the terms and conditions, including exclusions, for each policy. Understanding your coverage parameters up front will eliminate the guessing game.
4. Beware computer hackers. Cyber thieves are at work, and with employees working at home connecting to your network, there is the potential for a breach. Employees should be reminded to take precautions and beware of suspicious emails with attached links that if clicked, may allow your network to be breached.
How COVID-19 claims will fully play out over the coming months is unknown. What we do know is that it's very likely there will be many, as every business has been affected by coronavirus. It's time to prepare for business interruption and employee WC issues now.
David Chmiel, SVP, is the national director of claims for Hub International. Thomas Steinbrenner is a senior vice president at Hub International.
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