–By Douglas MacDonald, CPCU, CIC, CRM
As organizations continue to reopen and emerge from the coronavirus shutdown, organizations are assessing the risks and benefits to their businesses, their employees and the public. The coronavirus has forced us to examine risk exposures that we may not have previously considered. Here are some of the top questions for business owners as they reopen:
Why Doesn’t Business Interruption Coverage Include Pandemics?
Global pandemic risks are uninsurable. Business Interruption is designed to protect firms against the most common direct physical losses to their premises - perils such as fire, theft, hail, windstorm, riots, vandalism, etc. It is not designed to cover a shutdown due to viral pandemics, as it is very difficult to insure, spread the risk and finance the losses. Pandemics violate a cardinal principal of insurance, which is that large numbers of policy holders pool to fund a few losses at any one time. In a pandemic almost every policy holder simultaneously suffers losses. If every organization impacted by the coronavirus filed a business income loss around the world, the collective insurer policy surplus reserves would be inadequate to cover all the losses, bankrupting the system. Insurers therefore specifically excluded those risk exposures from their policies to maintain financial integrity of the insurance system. Further, they never charged their clients for the pandemic coverage. Most insurers believe they could not charge enough premium to cover catastrophic pandemic risks.
What Happens if Someone Contracts the Virus at My Business?
To be eligible for workers compensation, most states require the illnesses contracted at or through work to be “characteristic” of the job. Sick employees who seek damages, typically through worker’s compensation, must prove that they contracted the virus at work – which would be a challenge. If workers’ compensation does not cover workplace injury or illness, an employee (or a customer) would have to prove negligence on the part of the employer in a civil court — a precedent the legal world hasn’t yet established in this pandemic. The first labor and business disputes related to COVID-19 will be landmark cases that establish precedent for the lawsuits that follow.
Are My Employees Working From Home Putting My Business At Risk?
The closure of childcare facilities and to mitigate COVID-19 has forced many companies’ employees to work from home. One of the main drawbacks and risks of working from home, is cybersecurity. Home networks are often not as secure as business ones, and those employees working from home are prime targets for cyberattacks. A robust cyber liability policy can help mitigate these risks, as is consulting with your IT team about strengthening your company-wide cybersecurity program.
Am I Carrying Enough Life Insurance?
For a business owner, making sure you have enough ‘key person life insurance’ to keep the business operating should an unplanned death occur is a must. Making certain your family and business are adequately covered in the event of the unexpected death of a business owner, partner, or key employee can make the difference between business survival and financial ruin.
Have more questions about how the coronavirus can introduce new risks to your business reopening? Contact our team to put their expertise to work for you!