COVID-19: Coverage Questions
(Applicable to US customers only)
As we speak, our customers are making extremely difficult decisions about when and if to close their facilities and/or suspend certain programming during the current COVID-19 pandemic. While closing helps limit the spread of this virus, it also means suspending programming that communities rely on, and it may mean foregoing significant business income that organizations need in order to remain viable. We are already hearing from customers who are having to consider laying off staff or reducing compensation.
Understandably, our customers want to know how their insurance program will respond to this unprecedented crisis. Will there be coverage for our lost net income? Will we have to pay our premiums on time? Will our premiums be adjusted if we’ve closed our doors? Will our renewal go on as scheduled? All are reasonable, even urgent, questions—and we’ll address them all here.
Is there coverage for a coronavirus claim?
In light of the novel nature of these claims, we want to explain our coverage and let you know how we will view each claim. Please note that this communication is for general guidance only. Every claim will need to be assessed on its own facts. And, as you know, any discussion of a specific claim must be referred to a dedicated claims specialist.
First, there is no coverage available for coronavirus claims within the Standard Property Form. Here’s why:
- The Business Income and Extra Expense Form does not provide coverage for coronavirus claims because there is no underlying direct physical loss to the property.
- The form is accompanied by the Exclusion of Loss Due to Virus or Bacteria Endorsement which excludes coverage for any loss resulting from a virus.
- The Additional Civil Authority Coverage does not apply because there is no damage to nearby property that prevents access to the insured’s location.
What about the Communicable Disease Endorsement?
However, coverage for a coronavirus claim could potentially exist under the Food Contamination and Communicable Disease Coverage Endorsement, which is not subject to the Virus Exclusion. This Endorsement is standard for us and included with all Redwoods Property Insurance policies.
The Communicable Disease Endorsement is the coverage part that responds, for example, when a camp has an outbreak of norovirus and has to close for a short time to be decontaminated. In that case, the damage to the property is clear and specific to the location, as evidenced by the kids becoming sick at camp. This endorsement was not meant to respond to a community wide outbreak of an illness, but it could provide limited coverage for business income loss and certain extra expense related to coronavirus under a very narrow set of circumstances. If a scheduled location is closed by order of a government authority specifically as a result of the discovered or suspected presence of coronavirus at a scheduled location, coverage may apply.
Unless all three conditions exist (the location is scheduled, the closure was ordered by civil authority and the order was specifically because of a coronavirus transmission at the site), coverage does not exist for a Business Income claim under the Communicable Disease Endorsement and, in turn, the policy.
Then, why do I have this coverage?
This is a difficult moment and a bad time to learn that a cost you are incurring is not covered by your insurance. We hate to have to share this news with you, because we are in business to help make you whole when the unexpected happens. We’ve responded to customers many times over the years under the Communicable Disease Endorsement and we are among the very few insurers who even offer this coverage. If you have a norovirus or MERS event, you’ll likely be covered under this endorsement. But COVID-19 is a whole different circumstance. It is a worldwide catastrophe, racing across the whole of humanity. Its spread isn’t limited to any one surface at any one location. Like the global economic meltdown of 2008 and the resulting financial losses to community organizations that followed, the losses associated with COVID-19 are simply not contemplated by your insurance program.
Our doors are closed. Why am I still paying for insurance?
Some of our customers have chosen to close facilities and programs in order to prevent the spread of this virus. Others have closed certain programs, but are still running childcare operations. Many camps run little or no programming at this time of year anyway, but are concerned about whether or not they will be able to open during camp season. As you can imagine, each presents a different risk profile for us as your insurer. Even without programming (and the related revenue) buildings need to be adequately insured. Childcare programs still present risk, but no one will drown in a closed pool. No one slips and falls in a vacant building, but can someone get hurt during an on-line fitness class? Clearly, if your operations are mostly closed, but only for a short time, there’s likely no adjustment needed to your premiums—but if your camp doesn’t run this summer, we’ll need to reflect that change.
Each of your situations will be different and, over the weeks and months ahead, as we learn more about your new, evolving role in your community, we will work with you and your broker to better match your premiums to your risk exposure. Please know that we will remain fully staffed to serve you, but we do ask that you give us adequate time to address any potential premium changes. Circumstances are changing every day, so let’s allow enough time to pass so that you, we and your broker have a reasonable idea of what your modified operations might look like—and how long the changes might last. We hope you know, whether your new programming is virtual or on-site, we’re here to support the different way you’re fulfilling your ongoing mission.
Things are happening fast. Can we have a moment to breathe?
Yes. Focus on the needs of your community and your staff. For those in real need, we can be flexible about your premium payments. Also, if your renewal is between April and mid-June, we know that crisis response has you and your staff otherwise occupied. If it would be helpful, we’ll extend your renewal date to allow you the time to address more urgent needs. We’re reaching out to your broker to talk about that.
So, what now?
You may still have questions about your insurance program, your new operating profile—or about any number of other things as you look ahead to a period of change and uncertainty. Please call us if we can help. You may be offering programming in different communities, at different sites and, even, virtually. You’re doing your best to continue to build community and connection at a time when we are all lacking both. We’re grateful for, but not surprised by all you’re doing. While this note may not have contained the answers you’d wanted about coverage, we hope we’re responding otherwise to your needs in every way we can. We are all on the same, difficult road out of this crisis. None of us knows where this road will take us, exactly, but our faith, our values and our trust in our fellow human beings call us to believe we will end up in a good place. As we travel and when we arrive—together—at that destination, we look forward to serving you for many years to come.