You know, I'm surprised more politicians don't come out of insurance. The whole industry excels at giving vague responses that avoid answering your direct questions. This is not out of malicious intent to confuse you, but rather to avoid giving you misleading or false information. The truth involving insurance coverage is: It just depends. Insurance companies avoid giving specific answers unless they have precedence through firsthand experience, or the policy explicitly says something regarding the situation in question. This reality leaves your insurance agent hanging in the balance of wanting to provide accurate, clear information to you, the insured, yet being limited to the information available from the underwriter. Unfortunately, or more likely fortunately, the insurance industry has not had to deal with a pandemic like COVID-19. With that being said, most landscapers are or will be impacted to some extent. As a result, I am getting many questions as to what is or is not covered. The fact that landscapers are deemed an essential business will curb some of the damage, but none the less all landscape businesses are going to feel the impact.
I will start with saying, in fairness to insurance companies, that most commercial insurance is not typically designed to protect against people contracting an illness. It is meant more to cover the liability of your business. That being said, let's look at some of the most common situations where coverage may or may not be given. As a business owner, I want you to have an idea of what to expect in these circumstances.
1). Worker's Compensation
Worker's Compensation generally covers on the job injuries and illnesses, as long as the scope of employment is the cause of the injury or illness. If one of your employees contracts COVID-19, they may have coverage under your Worker's Compensation policy if they were initially exposed to the virus at work. Even then, it will be an uphill battle proving that the employee being at work dramatically increased the likelihood of contracting the illness. For healthcare workers this will be a lot easier than for landscape and other green industry businesses.
2). General Liability
A Commercial General Liability (CGL) policy is intended for third party coverage. This means it provides coverage to a business for damage, (bodily injury, personal injury, and property damage), where the business is legally liable. Damages caused by business operations, products, or on their premises apply. CGL coverage for COVID-19 related losses could arise out of a business' failure to protect individuals or the individual's property from contracting the virus. For example, if a business was aware of a contamination but did not take precautions to stop the spread of the virus, it could be held liable. With this being said, each CGL policy is different, and some may have added endorsements that take away coverage for this type of loss. A few of the most common places coverage could be excluded is in a communicable disease exclusion or a pollution liability exclusion.
3). Business Interruption/Income
This is probably the line of coverage that most landscapers are worried about, and rightly so. Landscape businesses are purely service oriented. These businesses fall into the product and service industry and are directly impacted by decreased consumer spending. If consumers are spending less due to fear of the virus, less disposable income or government mandated quarantines, businesses are going to make less revenue. As all business owners know, just because your business makes less revenue does not mean the bills do not have to be paid. This creates a very real threat. Business Interruption coverage is meant to replace lost income when your business is impacted by a covered property loss that suspends operations, i.e. a fire that burns down your building. The first part of that statement makes this sound like the answer to many business owners’ prayers. However, "covered property loss" is the kicker. Corona-virus related claims are unlikely to apply for this coverage because they aren't "covered property losses" and therefore do not trigger coverage. Additionally, most standard policies typically contain exclusions for bacteria, viruses and other pollutants.
As the narrative continues to unfold, help may come from the legislature or your state department of insurance. Legislatures in New Jersey, Ohio and Massachusetts have proposed bills that would require insurers to pay out for certain claims related to COVID-19. Of course, insurers are arguing back, saying that because these policies were not intended to cover these types of losses and therefore not priced accordingly, legislation of this nature would negatively impact the whole insurance industry.
The insurance industry does have a solid argument that since premiums were not calculated to cover losses of this nature it could end up crippling the industry and even effect the payment of future covered loss claims. Business owners also have justified asks in getting relief to help pay their normal business expenses during these uncertain economic times. Luckily, in the last week business owners have gotten some good news. Your livelihood no longer hinges on the legislature of your state passing a law requiring insurance companies to pay these losses, because the federal government has passed the CARES Act, which includes the Paycheck Protection Program. This program effectively gives you the exact same benefits (the ability to pay all your bills and keep your employees) that a covered claim for business interruption would give you. Plus, you don’t have to worry about your insurance costs going up the following year because of your claim.
I know these were not the exact answers we were hoping for, but I wanted to shed some light on what to expect in order to prepare your business for the potential economic impact coming. You can always submit a claim to see if it will be covered. Every situation is different, and there may be some situations where certain COVID-19 related claims are covered.
At Allen Insurance Group we are here to help businesses walk through these tough times. We have developed industry programs for our clients to help insure that they are covered correctly. Please reach out if you have any questions.