As COVID-19 spreads around the world, and the business environment changes daily due to government directives, organizations have found that there are many things to consider with respect to insurance and risk management.
Many businesses are finding themselves in a situation where they are mandated to shut down operations by their governments in order to prevent the spread of the COVID-19 virus. There are a number of things to consider when doing so, not the least of which is how their property insurance may or may not be affected.
Most property policy wordings contain an exclusion of coverage when buildings have been vacant or unoccupied for a specific period of time (generally between 30 and 60 days). In order to maintain coverage past this time period, the policy owner must provide notification to their insurer of this vacancy or unoccupancy. Insurers may agree to put a ‘vacancy permit’ on the policy, continuing coverage, albeit potentially on limited terms (e.g. less coverage, higher deductibles), and may also charge higher rates. Every insurer is taking a different approach during the COVID-19 pandemic on how they are handling these kinds of situations. Please contact your broker if you have questions regarding this, or if you will be shut down for more than thirty days.
TIPS » While a building is unoccupied or vacant, there are a number of risk mitigation measures that should be taken in order to prevent a loss:
- Maintain power and heat to the building
- Ensure fire protection equipment (such as sprinkler systems) continue to be operational
- Maintain fire and burglar alarm monitoring
- Have someone inspect the building at least once every 48 hours to ensure there are no concerns
- Remove excess materials and combustibles
- Remove containers that could attract dumping
- Maintain exterior lighting to deter crime and vandalism
- Shut off water in areas where it is not needed
In cases where companies are not shut down completely, they are often transitioning to remote work environments, with many employees working from home for possibly the first time. This also means an increased risk of cyber attacks and cyber losses, since there is the potential for employees to be using unsecured Wi-Fi connections and/or company-owned devices be lost or stolen.
Cyber Risk insurance can cover these exposures. A good cyber insurance policy will cover both first party losses (e.g. loss of hardware/software, loss of income, remediation, notification, and crisis management costs) and third party exposures (e.g. liability for loss caused to a third party, including compromising their personal data). Coverage wordings vary widely between insurers – your insurance broker can assist you in obtaining the best policy for your needs.
TIPS » In addition to a cyber policy, some good risk mitigation measures include:
- Teaching employees how to recognize phishing emails
- Ensuring all devices have up to date anti-virus protection
- Ensuring employees are working on secure, password-protected internet connections and avoiding public Wi-Fi
- Reminding employees that personal email accounts should not be used for any company business
- Teaching employees to shred confidential documents that are printed at home before disposing of them
Commercial General Liability
Some businesses are considered essential services, and continue to operate and invite the public into their premises. There is the potential for a Commercial General Liability policy to respond in the event of a situation where the insured’s negligence (or alleged negligence) results in an infection of the virus to a third party. For example, insufficient cleaning at a retail store results in the infection of a customer. In some cases, there are exclusions in the liability wording that may exclude coverage for pandemics. Each case would need to be considered individually, with a full review of the relevant policy wording.
Declaration of Emergency endorsements are common on many insurance policies in Canada. These endorsements extend coverage past the renewal date in the event that an emergency is declared by the relevant authorities, and there is a direct effect or impact on the insured, the insured site or insured property, or the operations of the insurer or its agent/broker in the declared emergency area. There is normally a requisite period of time that the coverage will be held over for. Premiums will be pro-rated for the additional time at expiring rates. The purpose of the endorsement is to ensure that coverage is not lapsed due to the inability of the insurer or the insured to arrange the renewal due to the emergency.
As always, if you have questions regarding your insurance coverage during these unprecedented times, contact your Staebler broker. We are here, ready to assist.