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CORONAVIRUS AND HOSPITALITY : BUSINESS INSURANCE
CORONAVIRUS AND HOSPITALITY:
Various types of insurance policies may respond with coverage for coronavirus and other infectious disease-related losses.
Hotel owners and others in the hospitality industries need to review their insurance coverage provisions to determine whether adequate coverage is afforded for coronavirus related losses. There are a number of coverages with insurance for the types of coronavirus losses that may be experienced by commercial policyholders, however the scope of the coverage will depend upon specific terms of each insurance policy.
We have surveyed the various types of insurance that may respond with coverage for coronavirus and other infectious disease losses, the scope of coverage will ultimately depend upon the specific language of each insurance policy.
Businesses interested in proactively managing their coronavirus exposure will accordingly be well-served to evaluate the adequacy of the coverage provided under their existing insurance programs
Business Interruption Insurance
COMMUNICABLE AND INFECTIOUS DISEASES
Hospitality industries usually have specialized insurance policies and extensions of coverage added to standard property insurance policies, which require physical damage to insured property. These extended policies may expressly provide insurance coverage for losses caused by "communicable or infectious diseases" without requiring physical damage to insured property.
In the event that a federal, state, or local governmental authority limits access to or from areas where active transmission of an infectious disease has been identified, "civil authority" coverage may respond with insurance for the attendant income losses of affected businesses. Many commercial property insurance policies provide coverage for business income losses sustained when a "civil authority" prohibits or impairs access to the policyholder's premises. A careful review of the wording, a policy's "civil authority" coverage may or may not require that the access restriction result from "physical loss" by a covered cause of loss and, if so, often does not require that "physical loss" occur to the policyholder's own property.
Some forms of political risk insurance have coverage for business interruption losses suffered by a foreign entity's operations in the host country resulting from local government regulatory actions. While disruptions resulting from a health edict such as that regarding the coronavirus may not constitute "expropriation" or contract frustration, many political risk policies afford coverage for business interruption for actions taken by the host country's government, even if there are no “physical loss.”
Commercial General Liability (CGL)
Infected guests may bring claims against hotel and other businesses in the hospitality industry. Claims that the businesses allegedly failed to exercise reasonable care in guarding against, or warning of, the risk of exposure to coronavirus. Commercial General Liability ("CGL") insurance policies should respond with coverage against third-party claims for bodily injury resulting from exposure to harmful conditions.
Workers' Compensation Coverage
Bodily injury claims brought against a company by its own employees, most states' workers' compensation statutes provide that an employee is entitled to benefits for "occupational diseases." However, an employee must be able to establish a direct causal connection to the workplace, for workers' compensation insurance coverage claim. If other claims for employee-related coronavirus illness do not qualify for workers' compensation benefits, coverage may still be afforded under certain CGL insurance policies.
E&O and D&O
In addition to CGL insurance, some hospitality industries, also purchase errors and omissions ("E&O") insurance, to third-party claims brought against businesses themselves, a company's directors and officers may be subjected to shareholder lawsuits alleging that their unreasonable actions (or inaction) in response to coronavirus or other infectious disease epidemics caused the company economic loss.
In particular, a company's shareholders may contend that management allegedly failed to develop adequate contingency plans, allegedly failed to observe protocols recommended or required by governmental authorities, and/or allegedly failed to properly disclose the risks of coronavirus posed to the company's business and financial performance. Directors and officers ("D&O") insurance policies may provide coverage for the costs and liabilities arising from these shareholder lawsuits.
Although the majority of D&O insurance policies exclude claims for bodily injury (with some exclusions worded more broadly than others), when afforded a "strict and narrow construction," as they must be under the laws of most states, such exclusions should not preclude insurance coverage for shareholders' economic loss claims. Nevertheless, policyholders should be mindful of the fact that insurers may attempt to invoke certain D&O policies' so-called "absolute" bodily injury exclusions (e.g., excluding coverage for any claim "based on, directly or indirectly arising out of, or relating to actual or alleged bodily injury") to deny coverage for shareholder claims with any connection to a coronavirus-related bodily injury, no matter how attenuated.
If your insurance companies fail to pay your legitimate claim. Under the doctrine called bad faith, insurance companies can be held liable for:
• Intentional underpayment of a claim
• Wrongful denial of a claim
• Failure to provide a reasonable explanation for the denial of a claim
• Failure to properly investigate a claim
• Failure to timely investigate or pay a claim
• Misrepresenting provisions within the insurance policy
Before you speak to your insurance broker regarding your claim beware there is no privilege. Consider having that conversation with your insurance recovery lawyer and guarding that conversation with privilege. It is important to make claims properly, claims that were made in which certain exclusions that are not covered under the policy may disqualify and bar your claim in its entirety. Not a good idea to wait for your claim to be denied first, then reach out to your lawyer later. It can be too late.
Insurance companies have a poor record of paying large claims voluntarily. We want to maximize your recovery. If you want us to make a claim or your insurance carrier refuses to pay a legitimate claim and you are ready to see if you have a case, Contact our insurance recovery legal team at Law Office of Sara J. Saba, P.A. online. We do not charge for initial consultations. Our services are available nationwide.
Law Office of Sara Saba, P.A. publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion
Sara Saba, Esq.
Nicholas Guiliano, Esq.
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.