Both the short term and long term impact of the coronavirus overall, is anyone’s guess. Never before have we experienced such a significant interruption of both our businesses and our everyday lives. There are more questions than answers; each of which has potential implications, especially when it comes to insurance coverage.

While policies spell out limits and exclusions, terms and conditions, few anticipated this atypical interruption of everything in our economy. We believe it will come down to what the insurance policy says, and how it is interpreted by each insuring carrier. Insurance coverage for any financial loss associated with the virus is uncertain, and the number of losses to be adjusted will impact the turnaround time. But there are steps you can take now to potentially minimize the impact to your business insurance expenses.

Business Insurance Options

Assessing your current insurance coverage in light of changes to your business resulting from COVID-19 impacts could identify opportunities to restructure or right-size your insurance program. Specific options to consider include:

• Return premiums: Work with your broker to revise your originally estimated rating basis (sales / payrolls / vehicles on the road, etc.) to generate return premiums from your insurers – returning essential dollars to their cash flow. This can likely be done without sacrificing or reducing coverage.
• Lower insurance expenses going forward: Ask your broker about re-writing or restructuring your insurance coverages going forward to adjust to the reality of new and ongoing changes to business operations. Freeing up insurance premiums will allow many businesses to focus their cash flow on the most important needs first.
• Alternative Risk Financing: New approaches continue to emerge to provide affordable coverage for those who qualify for captive insurance. Your insurance broker can help you explore an option that can best meet your risk appetite.

Contractual Considerations

As you continue to operate your business during this period of disruption, it’s important to ensure you are adhering to contractual obligations. You should start by attempting to negotiate more flexible arrangements. Specific clauses and provisions you may want to have your broker examine include:

• Force Majeure Clause (unforeseeable act of God)
• Uniform Commercial Code (basic assumptions of contract now made impractical)
• Common Law Doctrine (frustration of purpose or impossible to perform a contract obligation)

While your insurance broker can provide guidance to help you effectively exit a contract, you should also seek legal advice. Honoring contractual obligations can help limit the possibility of litigation.

Looking Ahead

Insureds may be struggling to sustain their insurance coverage. Some insurers are responding by suspending cancellations of policies due to nonpayment of premium, and by not issuing late pay notices or charging late fees. While not mandatory in most states, state insurance commissioners are expecting compliance.

Some of the relief measures reportedly being considered include:

• A shared public/private fund for businesses under 500 employees
• Government backstop for pandemic claims

If you need assistance with your insurance program or have any questions, please contact a member of our team.