SDV Insights

COVID-19 Business Interruption Challenges


Accessing Coverage

• Is direct physical loss or damage required?
• Does presence of virus qualify as physical damage
• Contingent/dependent property losses
• Civil authority
• Ingress/Egress
• Service interruption
• Virus Exclusions


Coverage Obligations
Don’t lose coverage because of an oversight!

• Timely notice
• Protect evidence, including computer information and e-mails
• Responding to insurers/outside adjusters
• Proof of claim compliance
• Preservation of property (sue and labor)
• Avoidance of voluntary payments
• Independent appraisal (sometimes)
• Statutory/contractual limitation of action periods

Determining Whether Losses May Be Covered:
Step One

• Was virus present on property?
• Did the government order your property to be closed?
• Did the government restrict access to your property?
• Are contingent business interruption (CBI) coverages in place for both direct CBI and indirect CBI events?
• Does policy explicitly exclude viruses?

Step Two: Considering Claims

• In-house Team
• Risk Manager, Claims Manager, Safety Manager, Corporate Counsel, Operations, Finance, IT
• Outside Experts
• Brokers/Claims Advocacy (consultants), Forensic Accounting, Claims Engineering, Legal
 

Types of Coverage - Civil Authority and Service Interruption
Losses caused by acts of civil authority that impact access to insured facilities

• May apply when government acts prohibit access to property of suppliers, providers, or vendors
• Some policies require a prohibition of access
• Often limited to 30 days from date of civil action prohibiting access
 
Damage to utility (electric, gas, data) interrupts service to your location

• Damage to overhead transmission and distribution lines sometimes excluded
• Caused by covered peril (flood/storm exclusions may negate)
• Usually contains a waiting period
• What happens when utility intentionally shuts down grid to prevent further damage?
 
Contingent Business Interruption

• Direct physical loss or damage to a dependent property (supplier or customer)
• The loss or damage is caused by a covered cause of loss
• The loss results in a suspension of operations at a location of supplier and customer
 
Issues That Impact Settlement

• Period of Indemnity
• Multiple Perils
• Consequential Loss
• Nuclear Exclusions
• Rolling Blackout
• Actual Loss Sustained
• Loss of Market/Market Conditions
• Idle Period
• Concurrent Causation
• Contingent Business Interruption
 
Measurement of the Loss - Maximize Recovery by Allocating to the Right Coverage Buckets Physical Damage

• Buildings, equipment, inventory
• Sublimits: debris removal, expediting expense
• Exclusions: nuclear, environmental

Time Element Losses

• Business interruption/mitigating costs
• Inefficiencies and additional costs to operate = extra expenses
• The loss results in a suspension of operations at a location of supplier and customer

Time Element Extensions

• Extended period of indemnity
• Contingent time element/CBI
• Service interruption
• Ingress/egress, (civil and military authority)

Soft Costs

• Delay
• Loss of Use
• Loss of Market

Key Takeaways
You will be faced with an event... it’s just a matter of time:

Be prepared
• Review coverage
• Have your team in place
• Have your facts and evidence in place

Be Proactive
• Take charge of the claims process

Differences are inevitable
• Assess your options

Click on this link to view the article in pdf format






CONTACT US


The email you are sending does not create an attorney-client relationship with SDV. We do not agree to representation until we have performed a check for conflicts of interest and expressly agree to provide services in a particular matter via an engagement letter. The information submitted to us via this website will NOT be treated as confidential or privileged as a lawyer/client communication and our receipt of this information does not prevent us from representing a client related to the subject of your inquiry.

Northeast

35 Nutmeg Drive
Trumbull, CT 06611

203.287.2100

233 Mount Airy Road
Basking Ridge, NJ 07920

973.446.7300

Southeast

999 Vanderbilt Beach Road, Ste 603
Naples, FL 34108

239.316.7244

West Coast

One BetterWorld Circle
Temecula, CA 92590

951.365.3145

SDV is headquartered in Connecticut, with regional offices in New Jersey, Florida, and California to better serve our clients. We are ready to answer your questions and are eager to assist you in developing solutions.