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US Outlook: Insurance Coverage Questions Amid COVID-19 Outbreak

March 24, 2020
Firm Memoranda

The COVID-19 crisis presents a number of novel issues that policyholders and insurers will face in the coming months. As COVID-19 has spread around the world, businesses are facing significant disruptions to their operations and supply chains, including government-ordered shutdowns, cancellations of events, and lawsuits. The projected impact to the world economy is
staggering and businesses have started to look to insurance carriers to cover their losses.

COVID-19 will raise coverage questions as to a variety of types of policies, including policies related to business interruptions, civil authority measures, event cancellation, workers’ compensation, general liability, and directors’ and officers’ liability. This climate and its accompanying challenges elevates the importance of having a comprehensive understanding of a business’s insurance portfolio, the scope of the coverage provided under those policies, and likely challenges to coverage.

While the question of whether a company has coverage will be specific to the policy language and the particular losses or injuries at issue, there are common issues likely to arise. This memo provides context for and guidance on some of the most pressing insurance questions in the current climate, and looks at cases from analogous events like the September 11, 2001 terrorist attacks and the spread of other infectious diseases, and also examines potential market-changing events such as legislative efforts to mandate insurance coverage.

The scope and likelihood of coverage may be impacted by events and issues outside policy language. For example, there are several legislative efforts underway to address the scope of business interruption coverage, including three in the United States House of Representatives and one in the state of New Jersey. Similarly, in light of the unprecedented and expected increase in COVID-19-related claims, AM Best is working to develop a new stress test to assess insurers’ balance sheets, including risks factors like capital levels and reserve adequacy.

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