On Thursday, May 14, 2020, I had the pleasure of moderating a panel with Tim Worke, CEO of Associated General Contractors of Minnesota, and Jason Wilsey, a Vice President and Shareholder at CSDZ, an insurance agent and broker focusing on construction clients. The panel addressed liability and insurance stemming from the COVID-19 Pandemic.
Tim discussed the concerns his constituents have raised with the Stay-At-Home Order in Minnesota and the coming changes. Specifically, he discussed the changes in the order and how businesses are going to get back to work, change their work practices, and consider protections they will need to put into place. He emphasized disruption in supply chain issues, the fact that some contracts may be delayed, who will pay for the delays, and whether force majeure clauses may be implicated. He further discussed the developing and changing best practices of businesses in dealing with worker safety and the virus, particularly in the construction field.
Jason discussed the types of liability policies that may be implicated if construction companies experience delays or illness on site. He discussed builders risk insurance mentioned commercial general liability policies and how they would potentially interact with losses. Jason emphasized the importance of putting carriers on notice of losses.
I described the difference between first-party insurance (like property and business interruption), and third-party insurance (like commercial general liability, and employment practices coverage). I shared Jason’s advice to put carriers on notice now. Under first-party coverage, it is the date of loss that governs when notice should be given, and many policies have limited periods after a loss to bring an action to enforce coverage. Additionally, I walked through a number of issues with business interruption coverage, including the requirement for a direct physical loss, the existence of exclusions, and also the fact that different policies have a different language. Some policies don’t have virus exclusions, some don’t require a physical loss to implicate business interruption coverage, and some have contingent business interruption coverage.
The panel discussed generally how liability would be apportioned and the general nature of insurance. It is difficult to spread risk when everyone is affected. The panel also discussed different state and federal legislation that could potentially affect the issue of coverage for COVID-19 losses.
The panel then turned to third-party liability policies and the fact that many of these policies do not have exclusions for a virus. Jason described the efforts of some carriers to change or reduce coverage at renewal and to “clarify” coverage mid-term. It was agreed it is important for businesses to assess their insurance program and keep abreast of any possible coverages and limitations on coverage. This is particularly important now, before any third-party claims come in.
The panel discussed the different types of policies that could potentially be implicated, including Directors & Officers and Employment Practices coverage, if a company fails to institute appropriate protections for employees. Workers compensation insurance could be implicated if employees get sick on the job. Commercial General Liability insurance could be triggered if claims are brought for damages because of property damage or bodily injury stemming from the Novel Coronavirus.
Finally, the panel discussed the implications of different government regulations. Some programs penalize businesses who lay off or do not offer work to employees, but the employees may be better off in the short-term receiving unemployment benefits. It is important for employees and employers to look carefully at the implications of all employment decisions.
The COVID-19 Pandemic has and will test many business relationships and the insurance that businesses have put in place to protect them from unexpected events. It is important for businesses to educate themselves on their insurance programs to maximize these protections.
Click here to listen to the Twin Cities Deep Dive: Insurance and Liability Implications webinar.
Christopher Yetka is the chair of Larkin Hoffman’s Insurance Coverage and Advice Group. He, or another member of the group, is available to answer your insurance questions. Christopher Yetka, cyetka@larkinhoffman.com, 952-896-3308.