The COVID-19 pandemic is putting new stresses on business and insurance. There many questions about COVID-19 Business Insurance and coverage like Business Interruption, Property Insurance, and Business Liability.
As a business owner and directing officer operating, you must ensure you are providing a safe work environment for your employees during the COVID-19 outbreak to reduce the risk of any violation in regards to occupational health and safety in the workplace. It is also your responsibility that the appropriate mitigation strategies be implemented to avoid possible insurance liability exposures that may arise to an employee or a customer due to COVID-19.
This is specifically applicable to many businesses deemed ‘essential’ and that remain open such as certain wholesale/manufacturing, takeout food, offices, retail, and residential/commercial building owners with tenants.
To provide some context on how you as a business owner could be liable to a third party during COVID-19, here are some examples of situations that could result in allegations against you for your negligence that may trigger your business insurance:
- If you are operating a restaurant and one of your employees did not wear gloves when preparing a customer’s meal because you had not implemented safe employment practices, you could be held liable if the customer becomes sick after eating the meal and is diagnosed with the coronavirus.
- As a multi–tenanted residential landlord, you did not take reasonable and prudent steps recommended by health authority guidelines to keep common areas clean and post rules on maintaining social distancing in common areas, especially elevators.
- You do not have written guidelines on requiring any staff that is sick or has been exposed to someone with COVID-19, to stay home and not attend the business premises.
Business owners, you are responsible to remain updated on the recommendation of health officials and implement any appropriate actions at your business to maintain a safe environment for your staff and customers.
COVID-19 Business Insurance Liability – Things You Should Consider to Reduce Your Risk:
- Increase the number of times the building is cleaned throughout the day including doors knobs, light switches, windows, elevator buttons, frequently used equipment, etc.
- Require employees to wear gloves while at work if they share any common surfaces with others, or are in dealing with the public. An example would be all restaurant cooking staff should wear gloves.
- Ensure employees are washing their hands frequently throughout the day to avoid the spread of germs on the premises.
- Install hand sanitizing stations on the premises for easy access to employees and any customers who enter the building.
- Post signs on the premises to keep social distancing in the mind of employees and customers. For example, a Limited number of people on the elevator at one time in an office building as enforced by Ontario Health Authorities or a Limited number of people in the change room area at one time in a store at the mall.
- Distance employees in work stations at least 6 feet (2 meters) apart from the next work station to practice social distancing while at work.
- Establish a remote work option. This would mainly apply to office work environments.
- Reduce face to face meetings with customers and possibly hold them virtually.
- Avoid all non-essential travel.
- Require employees to wear face masks where they are interacting directly with customers. This could apply to cashiers at a grocery store or contractors dealing with an essential service at a customer’s house or business.
Business Insurance liability policies may respond in the event of a third party claim for bodily injury or property damage, but it is important to mitigate risks to keep your business safe.
Here are some links to resources that can help:
1) https://www.cdc.gov/coronavirus/2019-ncov/downloads/community-mitigation-strategy.pdf
2) https://www.canada.ca/en/public-health/services/diseases/coronavirus-disease-covid-19.html?lang=eng
COVID-19 Business Insurance Property Coverage:
For business deemed ‘essential’, property insurance coverage remains unaffected. Ensure your business insurance policy has adequate property insurance coverage levels, and all alarm systems are operational.
Businesses closed during COVID-19 still require business property insurance content coverage, but with people not at the business there are additional risks. Most business insurance policies limit coverage for businesses or premises left ‘vacant’. If your business is closed or your building’s tenants are closed during this time, we recommend speaking with your insurance broker. They will review advise you on what actions you will need to take to ensure property insurance coverage responds in the event of a claim.
COVID-19 Business Interruption Insurance Coverage:
COVID-19 has caused many business interruptions due to slowdowns or temporary closure.
Many business insurance policies include coverage for business interruption. This insurance coverage applies where physical damage to a business location causes a reduction in sales. A common example is if a business is forced to temporarily closed due to a fire.
As a general comment, since COVID-19 is not an event that has created physical damage to a building or any business premises, business insurance policy’s business interruption coverage will not apply.
That being said, situations may differ between businesses. If you have any questions, discuss your situation with your insurance broker who will be able to advise you if reporting a business interruption claim to the insurance company for a deeper examination of the policy wordings is warranted.
COVID-19 Business Insurance Commercial General Liability Coverage:
COVID-19 is presenting new challenges and expanded business insurance liability exposures to all businesses. We recommend clients take all reasonable steps to minimize their exposure to potential liability claims that could be made against them. Therefore, we emphasize the importance of business owners to follow every safety measure recommended by health officials to reduce the risk of being liable to a customer or even an employee.
In this time of uncertainty, maintaining consistent communication with staff and customers is critical. Keep your people informed and update them regularly. You cannot over-communicate. Now is not the time to be silent.
Business Insurance Liability policies may provide coverage in the event a third party sues you alleging negligence of bodily injury due to COVID-19. Ultimately coverage will be determined by the specifics of each situation.
Should you become aware of a situation that may result in a possible business insurance claim, we recommend documenting the situation including all emails, letters, notices, conversations noting all dates and times. Do NOT admit or accept any liability. Doing so could limit or void your insurance coverage. Business Liability claims are often settled based on how well either party documents their case, so you must be prepared. Also, contact us immediately should you receive any written notice of claim.
Also, some businesses are altering their products to help assist in the production of health equipment. You must advise of any change in operations immediately. Even if the change in operation seems minimal, speak to your insurance broker so we can determine if your insurer needs to be notified. Remember that ALL business insurance policies require the client to advise the insurer of any changes in operations to ensure coverage responds.
Solutions to Reducing Business Insurance Premium during COVID-19:
COVID-19 is having a financial impact on many businesses. Business insurance is an important aspect of your business’s protection. Unfortunately, claims can happen regardless of COVID-19. That being said we understand the strain some business will be dealing with during this crisis, and our message is, “We are here to help”.
Some business owners may consider canceling their business insurance policies, but we strongly caution against this approach due to the reasons state below.
- Remember, claims occur and your exposure remains regardless of COVID-19. Not having an insurance policy means you are taking on all the risks associated with your business: property, contents, vehicles, and liability.
- Mortgage companies, lienholders along with Government and other regulatory bodies may require you to maintain certain minimum coverage levels.
- It is important to understand that once the policy is canceled, there no guarantee of what your policy offering might look like when you decide to reapply. Your new premiums could increase and coverage is reduced, or not be offered at all. Entering into COVID-19, the insurance industry was in the middle of a ‘hard market’, characterized by increasing premiums and reduced coverage offerings. The uncertainty around COVID-19’s effect on business’ may result in insurance companies changing their appetites affecting the terms and types of business exposures they will insure in the future. There is a likelihood that the ‘hard market’ will worsen post-COVID-19. Our recommendation is to maintain your policy to protect against higher premiums, and possible coverage issues in the future.
- It is important to note that canceling a policy at the policyholder’s request results in a short-rate cancellation fee. Therefore, it may not be economical to cancel the policy for a few months.
Strategies you may wish to consider in managing the costs of your business insurance, while not taking on unnecessary risks for your business:
- For commercial auto policies, place parked vehicles on comprehensive only. If you are not using certain vehicles, in many cases we can reduce coverage to ‘comprehensive only’ (i.e. fire, theft, and other perils) while the vehicle is parked. Be advised that there will be NO COVERAGE if you operate the vehicle, even if you are just moving it in your driveway. If considering this option, most companies will require the vehicles remains on comprehensive only for at least 30 days.
- For commercial general liability policies, consider amending revenues at year-end. Many policies include a provision allowing you to amend your liability premium at year-end based to reflect actual sales versus anticipated sales declare at the beginning of your policy term. If your business does experience lower revenues, most insurers will adjust your premium to reflect actual annual revenues at the end of your current policy term. Also, the lower anticipated premium for your upcoming renewal term may result in lower liability renewal premiums.
COVID-19 Business Insurance Premium Deferral:
Some insurers are prepared to defer premium payments. These options are reviewed on a case-by-case basis. Your broker will be happy to assist you if this is an option you wish to consider.
At isure we are here to help you through this difficult time. Insurance remains a critical part of your business and we want to ensure you are covered adequately should a claim occur. Our brokers are here to help you through COVID-19.
Other Useful Links:
Business continuity planning
Northbridge Insurance
Building a strong small business continuity plan
Northbridge Insurance
Coronavirus and small business: keeping you and your employees safe
Canadian Federation of Independent Business (CFIB)
Coronavirus and small business: keeping you and your employees safe
Canadian Federation of Independent Business (CFIB)
COVID-19?Pandemic Preparedness for Business
Canadian Chamber of Commerce
Coronavirus disease (COVID-19): Being prepared
Government of Canada, Public Health Agency of Canada
Coronavirus disease (COVID-19): Resources for Canadian businesses
Government of Canada, Trade Commissioner Service
