How COVID is impacting P&C insurance

COVID-19 is impacting both the employee benefits and the property and casualty insurance industries — and as a result, business owners who hold policies. Claim and premium trends are expected to be affected well into the future.

“The implications of COVID are far-reaching and can cause employers to incur significant expenses for something they have very little control over,” says Chris Zito, managing director of Zito Insurance Agency a Division of Risk Strategies. “It’s critical to speak with your insurance adviser to help you implement policies and procedures that complement your insurance program.”

Smart Business spoke with Zito about how to address the impact of COVID-19 on your property and casualty coverage.

How has the pandemic impacted business insurance coverage?

The pandemic is having a significant impact primarily on four areas of property and casualty insurance, with property-related coverages being the most visible. Plaintiffs are alleging that the virus present in the workplace constitutes direct physical damage and therefore triggers business interruption coverage. To date, most courts have rejected the argument, ruling that the virus does not meet the policy definition of ‘direct physical damage.’ If the courts continue to rule in favor the carriers, the number of policyholders filing business interruption claims with COVID-19 being the cause of loss may decrease.

Further, because of the dramatic increase in the remote workforce, some buildings may remain largely unoccupied or entirely vacant for extended periods of time. Typically, the longer a building remains vacant, the greater chance of loss from vandalism, theft, broken water lines, etc. This presents increased risk to the insurance carriers, and that translates to higher rates and reduced coverage. Talk to your insurance partner to better understand the risks and what you can do to mitigate them.

What has the impact been on general liability?

General liability coverage presents an entirely different challenge. Employees and third parties are alleging they contracted COVID on a business’s premises. The legal system allows suits to be filed regardless of fact or merit, and the defendant is forced to defend the allegations, often at significant expense. Most carriers have started adding various forms of communicable disease exclusions to their liability coverage, leaving businesses to defend these suits out of pocket.

Workers’ compensation is another moving target. The nature of workers’ compensation coverage does not require an allegation of employer negligence for an employee to file a claim; they only need to prove that their illness or injury occurred in the scope of employment. Accordingly, if a worker alleges a workplace injury — such as COVID exposure — an employer (or its insurance carrier) that denies the claim must again spend money fighting it.

In addition, remote work has increased the risk of claims as workers perform in less-controlled working environments at home. We’re seeing a large increase in neck and back claims as the result of inadequate workstations. Workers’ compensation cases are working their way through the courts, but rulings favoring employee claims could result in an avalanche of additional claims.

How have cybersecurity risks increased with the onset of COVID?

Concerns over hackers accessing information remain, and with more people working from home, additional exposures have developed. Devices are no longer in a controlled, secure environment.

Employers should implement security measures such as VPNs and anti-virus and ransomware software. Provide training so employees are aware of scams. Implement a policy that work-related property can only be used for business purposes and enforce it as best as possible. While challenging, it is imperative, as the last few years have shown even government agencies and large corporations are vulnerable to cybersecurity threats.

Employers should talk with their insurance advisers to become aware of the insurance-related risks they face. Understand there is no safe place, and your adviser can help you not only understand the risks but protect against them.

Insights Business Insurance is brought to you by Zito Insurance Agency a Division of Risk Strategies