Commercial Insurance Policies And COVID-19 Claims

Review commercial insurance policy to ensure coverage before making COVID-19 claims.
Review commercial insurance policy to ensure coverage before making COVID-19 claims.

Commercial Insurance And COVID-19 Claims

Review commercial insurance policy to ensure coverage before making COVID-19 claims, expert says.

Commercial Insurance Policies And COVID-19 Claims

By Amy Byrnes

As businesses across the country are shuttered to contain the spread of the COVID-19 virus, facilities management professionals are faced with uncertainty about the economic implications of the pandemic.

commercial insurance
Photo: Getty Images

But there are a few steps that can be taken now to get out ahead of any future coverage issues, according to Michael Fried, president of Aftermath Consulting Group, LLC, an Austin, TX-based insurance claim consulting firm.

To protect their organization against liabilities, facilities managers should determine whether their insurance policies include a civil authority clause, which outlines the loss of business income when a government entity denies access to the insured property.

“Noticing an insurance company of a loss before you’ve verified if there’s coverage will cost you a lot of money,” said Fried, who has over 20 years experience as an insurance adjuster. “You will be forced to fix or shut down your building and you may not be covered at all.”

He said that about 90% of commercial property insurance policies carry basic causes of loss forms — providing coverage for perils like fire, lightning, and vandalism but generally not civil authority. In order to trigger coverage under these boilerplate policies, there needs to be direct physical loss (DPL), such as a roof or windows blown off in the wind.

But in the case of viruses and other contaminants, proving DPL becomes more challenging as it’s airborne and not tangible and harder to prove. “We now have to become creative in finding coverage,” said Fried, who was a former project manager to one of the largest fire and water restoration companies in the United States.

While civil authority would be the most common way to enact coverage, since it was a shut down mandated by an outside source, insurance companies have learned from previous instances not to provide coverage without the DPL. After speaking with industry experts, Fried has determined that with COVID-19, insurance companies would consider an infected person as the DPL, triggering coverage for both the building and loss of business.

But, how do you prove that?

“Insurance companies aren’t just going to write a check because you say somebody infected was in the building,” he said, explaining to prove DPL will require testing, which requires money.

To help lay the groundwork and prove the case, Fried thinks it’s important to hire an expert “prior to going into battle,” such as a public insurance adjuster (PIA) or private adjuster (PA) to help prove up your case. There are also no upfront costs for a PA, who also needs to do his or her own due diligence and ensure that there’s coverage in the policy before taking the job.

This is especially critical during this COVID-19 crisis as there aren’t enough qualified insurance adjusters to handle the claims coming down the pike. “You’re not going to be able to get your pick of the litter of qualified adjusters,” he said. “You’re going to be getting former used car salesmen and blackjack dealers coming out to your property to document it but don’t know what they’re looking at.”

Fried also suggests that in an effort at being proactive, managers should consider having the building cleaned by licensed industrial hygienists now, even if it’s not a covered expense. “It’s much less expensive to clean your building now than to come in and clean a sick building later,” he said.

Ensure that whoever you hire to clean is licensed by the Institute of Inspection Cleaning and Restoration Certification (IICRC) with their own liability and uses approved techniques and cleaning products with a guaranteed kill claim for COVID-19.

While he predicts the COVID-19 pandemic will be a challenge, Fried thinks commercial property managers will be more prepared next time. In the future, he recommends considering migrating to a manuscript policy, which is tailored to the policyholder and could include civil authority and viruses and other contaminants, minus the usual loopholes and exclusions.

“I think it’s best to be proactive rather than reactive and encourage people to do their due diligence,” said Fried. “Retention of experts is the first and most important aspect in preparing a claim.”

Byrnes is a freelance journalist who writes on a variety of topics that have been published in The Washington Post and Family Circle magazine, among others.

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