Business Insurance In The COVID-19 Era

Insurance Professionals of Arizona | June 17th, 2020

After months of dealing with the coronavirus pandemic, most small business owners are eager to reopen fully. Online or pick-up orders probably didn’t equal your normal revenues, savings accounts are depleted, and lines of credit could be tapped out. It’s time to get back to work.

But not so fast!

In addition to COVID-19 precautions like masks and hand sanitizer, businesses should be thinking about their insurance policies. When you reopen, you’ll need to do more than protect your nose and mouth.

Business insurance protects small business owners from events that could hurt their operations or ability to stay in business. These could include;

• Property damage or vandalism
• Theft of physical assets or intellectual property
• Lawsuits
• Employee injuries
• Loss of income

Different types of business insurance policies cover each of these risks. The commercial property protects business owners’ physical assets such as buildings and inventory from damage, theft, and vandalism. If your building burned down, or a natural disaster destroyed your inventory, a commercial property settlement would help you recover.

Commercial liability protects small business owners from lawsuits related to bodily injuries on their property or errors and omissions. Under a commercial liability policy, you may need general liability, professional liability, commercial umbrella, or directors and officers insurance. Coverage needs will depend upon your business’ size, industry, and other factors. 

Workers’ compensation insurance pays out employees who are injured or become ill on the job. It helps them with medical bills, replaces a portion of lost wages, or could cover a funeral if the worst-case scenario happened. 

With the coronavirus pandemic hitting many businesses hard, Arizona small business owners with business insurance may be wondering if their insurance policies could provide some relief. The answer will depend on the types of policies you’ve purchased and any riders attached to them.

Commercial all-risk property insurance typically covers business interruptions. For this coverage to kick in, there must be physical loss or damage to either your property or that of a supplier or customer on whom you’re reliant. Insurers refer to these events as either “business interruption” or “contingent business interruption.” 

These policies could apply if the pandemic led to the physical loss or damage of property – for example, if food inventory spoiled due to forced closure. However, while restaurant owners have been attempting to file pandemic-related claims under business interruption coverage, most have been denied and lawsuits are ongoing. Your policy could exclude coverage for losses from the virus unless it has riders for business income losses due to infectious or communicable diseases.

This type of insurance protects you from claims of bodily injury or a lawsuit related to exposure to the virus at your business. It’s between you, your insurer, and an outside party. If you’re a salon, restaurant, or other higher contact business that’s reopening, this may be of particular concern to you.

For this policy to kick in, three things must be true. First, the business must have engaged in negligent conduct. At a salon, this could be failing to sanitize properly or wear masks as instructed by the states. Then, the negligent conduct must have led to actual damages. Someone couldn’t sue you for failing to sanitize if they didn’t get sick and incur medical bills.

Lastly, the injury or damage must be a direct result of negligent conduct. The party suing you would have to prove that they contracted COVID at your establishment, rather than on a trip to the grocery store.

While the fact that proving they contracted COVID-19 at your business could be quite difficult might seem reassuring, you would still have to pay for the costs of a lawsuit.  Even if you win, and your insurance policy covers the legal fees, your premiums might rise as a result.

If you have concerns about a liability claim when your business reopens, talk to your IPA agent about purchasing commercial general liability insurance or increasing your coverage.

What if an employee contracts COVID at work? Essential businesses have grappled with this question since the pandemic’s start, but now as Arizona has been re-opening other businesses have questions. 

Worker’s compensation doesn’t usually cover routine, communicable diseases such as the cold or flu. Worker’s compensation has exceptions for job-related illnesses, such as lung and respiratory illnesses developed by a firefighter, but many workers now considered “essential” do not work in occupations previously considered dangerous.

States have been amending their workers comp policies to cover healthcare workers or first responders impacted by a coronavirus, but companies and insurers have expressed concerns. These policies make it the company’s responsibility to prove that the infection was not work-related, which could raise insurance costs.

As of now, Arizona has taken no action concerning worker’s compensation and COVID. Throughout the pandemic, situations have changed often, and if you have questions you should reach out to your independent agent at Insurance Professionals of Arizona.

The pandemic caught all of us by surprise, and the insurance industry is no exception. As it’s dragged on and insurers have begun filing claims, there’s been some confusion about what their policies will cover. 

What is clear is that you should make sure that you’re thoroughly protected before flipping the sign on your door to “open.” Reach out to talk to an agent today. Call us at 480-981-6338 or text 480-462-0315.

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