Mississippi business leaders will continue to hope that the new coronavirus, COVID-19, stays away from and out of our state. But even if we avoid direct exposure to this worldwide health crisis, Mississippi companies will face risk and resulting losses. From international shipping and travel to reliance on component parts manufactured on foreign shores, Mississippi businesses may not realize the full effect of the coronavirus for years. However, there are specific steps that companies can take now to maximize recovery under their insurance programs for any losses of income.
First, know what insurance products you have in place. Identify and review all insurance policies applicable to your business and work with an insurance professional if needed to ensure you understand the coverages and exclusions. Examples of the types of insurance coverage that potentially apply include:
- Business Interruption Coverage. Commercial property policies typically provide coverage for business income losses due to an interruption in operations and extra expenses to keep the business running during the disruption. Most such policies require “direct physical loss or damage” to covered property, but this element might be satisfied, for example, if a factory or tour bus is contaminated. Coverage turns on fact-specific determinations unique to each claim and the specific policy wording.
- Contingent Business Interruption Coverage. Contingent BI coverage is a common coverage extension in commercial property policies that responds to losses from supply chain disruptions. Such disruptions could be caused by vendors, suppliers, business partners, or customers. For example, if your manufacturing plant relies on parts from a supplier’s overseas facility and that facility is closed because of contamination, coverage may be available.
- Civil Authority or Ingress and Egress Coverage. A forced government shutdown of a covered facility may be covered and could apply based on the risk of contamination alone.
- Event Cancelation or Travel Insurance. Specialized policies offer tailored coverage that may respond directly to losses from event and travel disruptions related to the coronavirus.
- Liability Insurance such as CGL, D&O, and E&O policies. In addition to the direct risks of loss discussed above, companies may face future liability from third parties alleging that some action or inaction of the company led to their own illness or some other type of loss. For example, D&O claims may arise from shareholder allegations that company leadership did not respond appropriately to the coronavirus risk.
Second, companies should closely monitor potential impacts and track any potential losses.
A business loss caused by the coronavirus may not be immediately obvious. Brainstorming and investigating how your business could be affected may be prudent. Likewise, accurate records of potential impacts will be needed to prove a loss. Proof of a business interruption loss may also require a detailed analysis by forensic accountants familiar with your industry.
Third, if you identify a claim or even a potential claim, providing notice to the insurer in compliance with the policy is absolutely critical. Some policies may require a notice of circumstances that could lead to a claim or loss even before the claim arises or loss occurs. Work with your insurance or risk management professional to timely submit the claim and diligently pursue the insurer’s response. The insurance industry may be overwhelmed with coronavirus claims in the coming months.
Finally, do not accept a denial letter without careful consideration. Unfortunately, covered claims are often denied in the first instance due to a misunderstanding of the underlying facts or an unduly rigid interpretation of the policy wording. Under Mississippi law, wording that is open to more than one reasonable interpretation is construed in favor of coverage and insurers bear the burden to prove that an exclusion from coverage applies.
» ALEX PURVIS is an insurance coverage lawyer who represents commercial policyholders in Mississippi and beyond. He is based in the Jackson office of Bradley (www.bradley.com), a national law firm with a full-service Mississippi office. Alex is a fellow in the American College of Coverage Counsel and co-editor of Bradley’s insurance blog: www.itpaystobecovered.com.