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Connell Foley’s property insurance group is comprised of market leaders with well over 100 years of combined experience addressing complex coverage issues on behalf of the insurance industry. The group has significant experience with claims involving widespread catastrophic losses, including serving as national coordinating coverage counsel for 9/11 claims and as coverage and litigation counsel handling claims relating to the SARS outbreak, Hurricane Katrina, Superstorm Sandy and other disaster events. Below is Connell Foley’s high-level summary of potential property insurance coverage issues related to the COVID-19 crisis. The purpose of this summary is to flag potential coverage issues for further discussion.  

While insurance coverage issues involving first-party property policies are generally determined by the policy language, other factors may come into play. Historically, in times of widespread losses from disasters, such as 9/11, states and the federal government have stepped in with statutes, regulations, advisories and similar mechanisms, which could impact policy language or its application. A prime example is the Terrorism Risk Insurance Act passed in the wake of 9/11, whereby the federal government enacted a statute regarding the availability of terrorism insurance, and even assumed some of the risk. An analysis of coverage issues related to COVID-19 must take the foregoing considerations into account.

Since the start of the COVID-19 crisis, there has been a widespread release of information regarding: (1) new case filings; (2) legislative, administrative and industry responses to the crisis; and (3) analysis of insurance issues related to COVID-19, mostly from the perspective of the policyholder. The following high-level summary examines the emerging coverage issues related to COVID-19. We note that every situation and claim needs to be addressed on a case-by-case basis, taking into account the policy language, the particular facts of the case and the applicable law, usually of the jurisdiction where the property is located.

One, and likely the primary, focus for COVID-19 property insurance claims will be claims for lost earnings or extra expense under business interruption and related time element coverages. Other significant COVID-19 related claims are expected to include those for cleanup and debris removal expenses, and sue and labor or protection and preservation of property expenses, for both time element and property damage. Generally, property insurance policies require “direct physical loss or damage” and this is equally a requisite for time element coverages. A key issue will be whether the presence in premises or on property of the coronavirus constitutes physical loss or damage to property. 

There are different types of business interruption claims and extensions of coverages in a property insurance policy that may be at issue in a COVID-19 claim, including those based on:

1. Damage to insured property, potentially triggering basic business interruption coverage, which as noted requires direct physical loss or damage to insured property resulting in an interruption of business and lost earnings or profits.
2. Damage to an insured’s supplier or customer, potentially triggering contingent business interruption coverage.
3. A government order resulting from physical loss or damage of the type insured, which prevents access to insured property, potentially triggering civil authority coverage.
4. Physical disruption or prevention of access to or egress from insured property resulting from physical loss or damage of the type insured, potentially triggering coverage and ingress/egress provisions.
5. Extra expense coverage for expenses incurred to reduce loss or to continue operations using alternative property, which are either part of business interruption coverage or a stand-alone coverage extension.
6. Industry-specific coverages, such as: tuition losses or lost research for universities; evacuation expenses for hospitals; and lost rental income or leasehold interest for real estate.

Aside from the multiple issues of whether there is coverage under the policy, exclusions must be evaluated. Other related issues will likewise be implicated, including the length and the appropriate calculations of the period of interruption.

Connell Foley attorneys are readily available to provide guidance and advice to the insurance industry and our property insurance carriers in this emerging and dynamic crisis.