Policy Renewal Pitfalls

Written by Gary Reinhardt, Esq. The Bureau of Insurance strongly encourages insurers and other licensees to be flexible and take into consideration the hardships and constraints many individuals and businesses are experiencing during this unprecedented public health emergency. For this reason, the Bureau encourages those it regulates to consider taking the following actions, consistent with prudent insurance practices: Insurers should consider relaxing due dates for premium payments, extending grace periods, waiving late fees and penalties, and allowing payment plans for premium payments to otherwise avoid a lapse in coverage. Insurers should also consider cancellation or non-renewal of policies only after exhausting all other reasonable efforts to work with policyholders to continue coverage. (Bureau of Insurance bulletin, March 27, 2020) The Bureau of Insurance (BOI) is not mandating that insurers provide flexibility with this statement, merely that insurers “should consider” not canceling policies if insureds have COVID-19 related issues that hamper premium payments.  However, some insureds are taking advantage of the extensions of insurers and using this to shop rates or just take a break from premium payments. If insureds do not renew a policy, an insurer does not have to jump through all of the cancellation hoops contained in title 38.2 of the Code of Virginia.  If an insured does not respond to an offer to renew, the policy lapses and the insured has no coverage as of the timeframe contained in the policy. Almost if not every insurer initially conditions renewal on receipt of premium when the insurer makes its first offer of renewal.  This condition on receipt overrides any claims that simply mailing the premium prior to...

Business Interruption Coverage for COVID-19

Written by Janeen Koch, Esq. & Gary Reinhardt, Esq.  As the country reels from the devastating impacts caused by COVID-19, commercial property insurance carriers are being inundated with claims – primarily those for business interruption losses.  These claims are, for the most part, being denied. Many commercial insurance policies, including those that include business interruption coverage, do not include coverage for viruses such as COVID-19. After the SARS outbreak in 2003, Mandarin Oriental International Ltd. received $16 million from a settlement with its insurers to pay for business interruption losses due to the outbreak.  Insurance carriers responded by adding endorsements to their policies excluding coverage for “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”  Based upon this exclusionary language, business interruption losses due to COVID-19 would almost certainly be excluded under the clear and unambiguous language of the policy. However, for those policies that do not contain such an exclusion, it is less clear whether business interruption claims would be excluded from coverage.  To obtain coverage under a commercial property policy, the insured must demonstrate “direct physical damage” to the property caused by a covered loss. Typically, such losses covered under these policies include damage caused by fire or natural disasters such as earthquakes or hurricanes. In some instances, coverage may be afforded when the property is not accessible or habitable due to damage to properties in the surrounding area.  For example, coverage has been provided for businesses that must close due to a chemical spill at a neighboring property. Although...

Compensability of COVID-19 Claims in Virginia

Written by Claire Carr, Esq. Edited by Rachel Riordan, Esq. Workers compensation’ claims based on COVID-19 are on the rise.  Adjusters and employers are starting to receive questions about these clams and the circumstances under which they may be compensable.  This article examines COVID-19 claims as an occupational disease under the Virginia Workers’ Compensation Act and how we anticipate these claims being handled by the Virginia Workers’ Compensation Commission. When dealing with diseases, the Virginia Workers’ Compensation Act differentiates between an “Occupational Disease” and an “ordinary disease of life.”  Virginia’s Occupational Disease statute, Va. Code §65.2-400(A), defines an occupational disease as “a disease arising out of and in the course of employment, but not an ordinary disease of life to which the general public is exposed outside of the employment” (emphasis added).  Under Va. Code § 65.2-400(B), to meet this burden, the employee must prove (1) a direct causal connection between the work conditions and the occupational disease; (2) that the disease can be seen to have followed as a natural incident of the work as a result of the exposure due to the nature of the employment; (3) that the disease was proximately caused by the employment; (4) that it was not a disease to which he would have had substantial exposure outside of employment; (5) it was incidental to the character of the business, and not independent of the employee/ employer relationship; and (6) the disease originated in a risk of employment and flowed as a direct consequence of it. The elements above are typically proven with competent medical evidence.  The most obvious types of occupational disease...

States and U.S. Government Grapple with Legislation Aimed at Ensuring Business Interruption Coverage for Pandemic-Related Losses

Written & Edited by Janeen Koch, Esq., Kevin Kennedy, Esq. & Matt Daly, Esq. As businesses around the world suffer dramatic declines in revenue due to the pandemic, they are turning to their insurance carriers seeking coverage for business interruption losses.  However, many of these claims are being denied based upon the fact that they are either not covered or specifically excluded under the terms of the insurance policy.  The requirement that insureds demonstrate “direct physical damage,” coupled with the fact that many policies include a virus and bacteria exclusion, will make it difficult for business owners to obtain coverage for these losses.  Consequently, legislators in many states are proposing laws to require insurance companies to retroactively provide coverage for business interruption claims even when the policies specifically exclude such coverage. New Jersey became the first state to initiate the trend of looking to rewrite business interruption coverage for COVID-19 into these policies with proposed bill A-3844.  That bill would require business interruption claims to be honored by insurance carriers for any business with fewer than 100 full-time employees that had a business interruption policy as of March 9, 2020.  It appears that New Jersey’s bill has stalled for now, but other states have brought forward similar proposals, including New York, Massachusetts, Pennsylvania, Michigan, and South Carolina, as well as the District of Columbia. The Federal government has also drafted legislation aimed at protecting small businesses from losses sustained as a result of virus-related closures.  H.R. 6494 – Business Interruption Insurance Coverage Act of 2020 – was introduced on April 14, 2020.  The bill, which has bipartisan support, would...

Virginia Courts Update

The Supreme Court of Virginia has issued a Fourth Order Modifying and Extending the Declaration of Judicial Emergency in Response to COVID-19.  The full order can be viewed here. In all civil cases, any tolling of deadlines and obligations arising out of Part Four of the Rules of the Supreme Court of Virginia shall terminate as of the effective date of this order (May 18, 2020). All discovery issued with a deadline to respond during the judicial emergency shall be due within twenty-one (21) days of the effective date of this Order (May18, 2020). Litigants are encouraged to resolve as many pretrial matters as possible with or without the assistance of the courts. All courts are authorized to accept pleadings, orders and other documents that are electronically signed, including those where the electronic signature is accomplished by scanning. Continuances and excuses for failure to appear shall be liberally granted for any cause resulting from the impact of the ongoing COVID-19 crisis. Effective immediately, it is ORDERED that all civil and criminal jury trials are suspended and shall be continued until further notice and no jury trials shall occur in...

Companies’ COVID-19 Considerations

Written by Brian Clarry, Esq. Edited by Bill Pfund, Esq. Amid COVID-19, companies across industries including construction, logistics, healthcare, education, and entertainment are reassessing their positions in this new risk environment. Business interruptions and evolving areas of exposure are forcing companies, and their insurers, to gauge potential mitigation measures. In this context, popular legal terms of “Force Majeure” and “Act of God” are being discussed. But do they apply to COVID-19, and if so, how? An Act of God or Force Majeure (FM) event is a natural occurrence that causes losses for which no other individual or entity can be blamed. Earthquakes and tsunamis are common examples. A pandemic such as COVID-19 would seem to apply. Predictably, however, it is not that simple. It is important to consider how this concept applies in the context of commercial contracts, insurance contracts, and tort liability. Commercial Contracts An Act of God contractual provisions, also called Force Majeure clauses, relate to events outside human control, such as flash floods, earthquakes, or other natural disasters. Such clauses can free a contract’s parties from obligations if such an event occurs. A close look at the contractual language is necessary to assess and mitigate commercial and operational risks during the ongoing health crisis. There is no single “standard” FM clause. In fact, they often vary widely by industry. FM clauses often list specific items that qualify as a FM event, e.g., strikes, wars and riots. Many clauses will also include an “Act of God” in the list. Others will include a catchall phrase such as “any other event beyond the reasonable control of a party,”...