You may have claims for property damage, business interruption, and contingent business interruption.
Liability coverage, extra expense coverage, coverage for losses caused by civil authority directives, and other special coverages you purchased for your business may be implicated. Your policies, and there may be many of them, will address covered losses, insured perils, all-risk protections, exclusions, and endorsements limiting or expanding language in the policies themselves or addressing consequential issues explained nowhere else. You have spent untold years making your business a success. You have much to protect during this unprecedented time, so you pull out your stack of insurance policies. They read like, well, insurance policies. What to do? Here are five things that are essential now.
Call Your Broker
Ask them to provide a complete and current copy of all insurance policies you have, with all attachments, endorsements, and periods of coverage. Don’t guess at which attachments or endorsements go with which policy. Without a doubt, the single most determinative factor in any coverage analysis is the language of the policy itself. When interpreting policy provisions, what might appear to be an unrelated provision or endorsement might well assist in buttressing a preferred interpretation of the provision in issue. Indeed, endorsements may well specifically address coverage, or lack of coverage, for viruses and bacteria. You need all of your policies to be sure what you have and what you do not.
Consider What Has Caused Your Loss and What Losses You Have Suffered
The coronavirus is new, unique and developing, and the ways in which it injures your business are new, unique and developing. You close your business because the state tells you to do that. You suspend operations because an employee was diagnosed with the virus. Demand for your product is not as strong. Another state says you can’t sell in that state. Your supplier is shut down. Your buyers have limited operations or are seeking alternative sources. Maybe all of these are happening at the same time. Each cause may well have categories of losses unique to it.
You know your business better than anyone else, and your perceptions of your losses, and what caused them, will be the most comprehensive and most accurate. While your lawyer can, with you, consider what policy language might help, your initial and ongoing analysis is essential.
Document
You should take active steps to assure that all losses are documented with “reasonable certainty,” the standard often used to prove damages in these cases. Assess your current record keeping with key employees in this regard. If you are uncertain that current systems will supply proof of your losses with reasonable certainty, develop and implement additional ones. While most coverage claims involve expert damage analysis at some point, you will supply the raw data and the analysis is only as good as what you supply. A claims manager who receives thorough, detailed and carefully prepared and documented proof of damages is far more likely to acknowledge coverage.
Provide Notice Early and Often
All policies will have provisions requiring notice of claims, specifying the content and manner of such notice. It is important to fully comply. While it may seem a hypertechnical defense against an insurance claim when the coronavirus has been reported every night on the news for months now, claims have been dismissed for failure to provide notice in accord with applicable policy provisions. Insurance companies may legitimately claim prejudice if their investigation into claims is unduly hampered because of a failure to notify.
Recognize as well that the nature of your insurance claims may change, and an additional notice of loss should be provided if it may be argued that an initial notice does not address new loss experiences. For example, a typical requirement under property and business interruption policies is proof of “direct physical loss of or damage to” property. While current legal precedent is inconclusive as to whether contamination of business property by the virus constitutes physical damage, numerous test cases are pending across the nation. New theories are being developed. Moreover, science has not yet determined just what coronavirus is and how it causes all the harm that it does. Whether it in scientific fact fits the list of various identified policy exclusions relating to “disease” in property insurance policies may change as more is learned. Indeed, the Pennsylvania Supreme Court, in determining that Governor Wolf acted constitutionally in issuing certain business closure orders, determined that the COVID-19 pandemic qualifies as a “natural disaster” because it, like acknowledged disasters such as hurricanes, tornadoes, storms, earthquakes, fires and explosions, involves “substantial damage to property, hardship or loss of life.” (Emphasis added.) Although the case involved an entirely different context than this discussion, it illustrates that when more is understood and more conclusions are stated, additional policy notices may be in order.
Similarly, the current outbreak has given rise to directives of civil authorities of unusual nature and quantity. Additional local, state, federal and foreign directives will be forthcoming, whether to assist a failing economy or to further existing safety measures. Business losses, and what will cause them, remain unpredictable in many circumstances. Additional notice responsibilities may well arise.
Have Your Policies Reviewed
As one-sided and opaque as it may be, the language of the policy itself controls. Many policy provisions have developed unshakeable interpretations as a result of being litigated over the years. Some remain ambiguous and subject to multiple interpretations. Have your policies reviewed by a lawyer to determine what coverages exist, what requirements of such coverages are problematic, whether any exclusions are applicable and, if arguably so, how you might get around them to protect the business you spent so many years building up.
If you have any questions or would like to discuss what potential options exist for your business, please contact your Metz Lewis relationship attorney, Steve Petrikis (412-918-1191 or spetrikis@metzlewis.com), or Josh Baker (412-918-1149 or jbaker@metzlewis.com).
This post was written by Steve Petrikis and Joshua Baker
