COVID-19 and hurricanes: The perfect storm
As workplaces begin to reopen, carriers should be ready to provide guidance, support and understanding to their insureds.
COVID-19 has created significant challenges for individuals, businesses and governmental entities tasked with coordinating response and recovery.
Despite the gradual reopening of businesses, workplaces continue to face unprecedented challenges, particularly as they attempt to return to “normal” day-to-day operations.
It is important for all businesses to adequately prepare for and adjust to the “new normal” and all the implications that come with it. Although the pandemic is at the forefront of every business owner’s concerns, those in Florida and other coastal areas cannot let their guard down as we are now facing the risk of a significant hurricane during what is predicted to be an active storm season. The ongoing pandemic combined with the threat of a hurricane creates the perfect storm for financial losses.
There are ways, however, for a business owner to prepare for a worst-case financial scenario.
Document every loss
As the transition is made from business closures and remote-work norms to a gradual opening, businesses should continue to maintain comprehensive and accurate financial records, logs, and time sheets. Businesses should review their insurance policies to evaluate their coverages and the requirements of the policy. Although a particular insurance policy may not provide coverage for virus-related losses, it could require notice to the insurance carrier or production of certain documents within a particular time period. As such, before reopening, businesses should know which records should be kept and provided. Even if a business believes it is not afforded insurance coverage for COVID-19 losses, records of all extra expenses, costs and other damages should be recorded.
Several state governments are considering legislative efforts to mandate coverage for such losses, irrespective of existing policy exclusions or terms . Additionally, state governments and the federal government are considering legislation that could seek to compensate businesses for their losses. A business owner would be well served not to miss out on this possibility by abandoning their documentary efforts once the workplace has been reopened.
Track local regulations
Businesses should also pay close attention to orders executed by state and local authorities as well as the Centers for Disease Control and Prevention (CDC). These orders will not only provide guidelines for reopening and ongoing operations, they could also play a part in triggering or terminating coverage under insurance policies that might contain coverage for losses under civil authority provisions of the policy. Businesses should be aware that re-opening early or violating orders could jeopardize a business interruption claim for damages. Businesses should maintain compliance with all guidelines set forth by authorities.
Workplaces in the process of re-opening should take efforts to manage their risks despite changed environments and expectations. Throughout this transition period, many questions remain unanswered, such as:
- Will underwriting departments look unfavorably on the submission of COVID-19 claims, particularly when many are so desperate for relief?
- If adverse underwriting decisions are made on the basis of such claims, will government intervention be necessary to protect insureds?
- Will premiums increase as a result of the pandemic related claims?
It will likely take time to procure answers to these questions. Nevertheless, as many workplaces reopen, carriers should be ready to provide guidance, support, and understanding to their insureds about how to minimize risks, best practices for claim submissions and adjustments, and anticipated trends for premiums and policy renewals.
Managing weather risk during the pandemic
Business owners should continue to take precautions in light of COVID-19, but also must take due care to prepare for hurricane season. Businesses should create or update their emergency operating plans and compile lists of all emergency contacts, employee contacts and insurance agent contacts that could be necessary in the aftermath of a storm.
Photographs of insured buildings, personal property and any other insured property (such as inventory) should be taken both before and after a storm. As with any loss, businesses should maintain detailed and accurate business records before, during and after a storm.
Businesses may also consider establishing relationships with emergency services vendors who can provide emergency remediation services in the aftermath of a storm, a time during which they may otherwise be in high demand and unavailable. Businesses may consider incorporating ledger codes into their accounting records for COVID-19 losses and hurricane losses. Implementing such a system will allow businesses and insurers to more readily and accurately evaluate losses and income records over the relevant periods of time.
As businesses and workplaces continue to re-open, they should take care to ensure that they are prepared for the continued battle against COVID-19 as well as the significant risks posed by what is projected to be a busy hurricane season.
Gina Clausen Lozier (gclausen@bergersingerman.com) is a partner with Berger Singerman and member of the firm’s Dispute Resolution Team. She focuses her practice on first and third party claims and coverage analysis. Gina is one of only two lawyers in Florida recognized in the prestigious legal publication Chambers for her work on behalf of policyholders.
Madelyn Rodriguez (mrodriguez@bergersingerman.com) is an associate with Berger Singerman and member of the firm’s Dispute Resolution Team. She concentrates her practice on a broad range of commercial and insurance litigation.
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