SDV Insights

COVID-19 Business Interruption Challenges


Accessing Coverage

• Is direct physical loss or damage required?
• Does presence of virus qualify as physical damage
• Contingent/dependent property losses
• Civil authority
• Ingress/Egress
• Service interruption
• Virus Exclusions


Coverage Obligations
Don’t lose coverage because of an oversight!

• Timely notice
• Protect evidence, including computer information and e-mails
• Responding to insurers/outside adjusters
• Proof of claim compliance
• Preservation of property (sue and labor)
• Avoidance of voluntary payments
• Independent appraisal (sometimes)
• Statutory/contractual limitation of action periods

Determining Whether Losses May Be Covered:
Step One

• Was virus present on property?
• Did the government order your property to be closed?
• Did the government restrict access to your property?
• Are contingent business interruption (CBI) coverages in place for both direct CBI and indirect CBI events?
• Does policy explicitly exclude viruses?

Step Two: Considering Claims

• In-house Team
• Risk Manager, Claims Manager, Safety Manager, Corporate Counsel, Operations, Finance, IT
• Outside Experts
• Brokers/Claims Advocacy (consultants), Forensic Accounting, Claims Engineering, Legal
 

Types of Coverage - Civil Authority and Service Interruption
Losses caused by acts of civil authority that impact access to insured facilities

• May apply when government acts prohibit access to property of suppliers, providers, or vendors
• Some policies require a prohibition of access
• Often limited to 30 days from date of civil action prohibiting access
 
Damage to utility (electric, gas, data) interrupts service to your location

• Damage to overhead transmission and distribution lines sometimes excluded
• Caused by covered peril (flood/storm exclusions may negate)
• Usually contains a waiting period
• What happens when utility intentionally shuts down grid to prevent further damage?
 
Contingent Business Interruption

• Direct physical loss or damage to a dependent property (supplier or customer)
• The loss or damage is caused by a covered cause of loss
• The loss results in a suspension of operations at a location of supplier and customer
 
Issues That Impact Settlement

• Period of Indemnity
• Multiple Perils
• Consequential Loss
• Nuclear Exclusions
• Rolling Blackout
• Actual Loss Sustained
• Loss of Market/Market Conditions
• Idle Period
• Concurrent Causation
• Contingent Business Interruption
 
Measurement of the Loss - Maximize Recovery by Allocating to the Right Coverage Buckets Physical Damage

• Buildings, equipment, inventory
• Sublimits: debris removal, expediting expense
• Exclusions: nuclear, environmental

Time Element Losses

• Business interruption/mitigating costs
• Inefficiencies and additional costs to operate = extra expenses
• The loss results in a suspension of operations at a location of supplier and customer

Time Element Extensions

• Extended period of indemnity
• Contingent time element/CBI
• Service interruption
• Ingress/egress, (civil and military authority)

Soft Costs

• Delay
• Loss of Use
• Loss of Market

Key Takeaways
You will be faced with an event... it’s just a matter of time:

Be prepared
• Review coverage
• Have your team in place
• Have your facts and evidence in place

Be Proactive
• Take charge of the claims process

Differences are inevitable
• Assess your options

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