With developing news of the new coronavirus and its impact on worldwide business operations, here’s a quick reminder to those professionals in charge of risk management for their company. This health emergency will have direct and indirect impact on companies around the globe. From international shipping and travel to reliance on component parts manufactured in China, we may not understand the full impact for years. That said, there are a few things companies can do now to maximize recovery under their current insurance programs.
First, as always, read the policies and confirm what you have. Commercial property policies should provide business interruption and extra expense coverage that may be triggered. Civil Authority coverage may also come into play: Even without physical loss to the policyholder’s own property, there may be coverage for income losses caused by government shutdowns that impair access to facilities such as manufacturing plants or shipyards. And don’t forget contingent business interruption coverage. Even if your business doesn’t have property overseas, you can suffer a contingent business interruption loss if one of your suppliers is impacted by this health crisis. Insurers may try to deny coverage without proof of direct physical loss to property, but the coverage issues arising out of this type of event can be complicated and should be considered on a case-by-case basis. Finally, third-party policies could also prove significant if businesses face future scrutiny or litigation arising out of their response to the crisis.
Second, track any possible impact. A business loss as a result of an international virus outbreak may not be immediately clear or obvious, so some investigation or creative consideration may be required. What’s most important is identifying possible losses and tracking those scenarios as they play out.
Third, remember any notice requirements. Once there is a loss, the insurer needs to be put on notice in accordance with any requirements in the policy. And keep in mind that some policies may even require notice of circumstances that could lead to a claim or loss.