This blog post can also be found on our Coronavirus Resource Center.
R&W Coverage for COVID-19
We have seen a variety of potential exclusions—ranging from very broad to more specific—for coronavirus, or COVID-19. We have every reason to believe exclusions will continue to be put in place on a standard basis at least for the time being. Some underwriters are avoiding an exclusion by putting COVID-19 related language in the policy’s definition of loss. In most new quotes/Non-Binding Indication Letters, we are seeing COVID-19 in the heightened risk section.
Obviously the broader the language relating to Loss (e.g., Loss “arising out of the COVID-19 virus”), the more it could be applied to practically any loss. Any change in financial activity during the pandemic period could be questioned as relating to the virus and, therefore, excluded.
On the other hand, “Loss arising out of failure to meet material contracts due to COVID-19” is a much more specific use of language and provides a much broader form of coverage.
We think having a good handle on some specific areas of diligence will enable your broker to argue for more specific exclusions, if any, relating to COVID-19.
Diligence to Create Underwriter Confidence
On most deals that are currently in underwriting, we are seeing questions being added to diligence agendas that ask how the buyer thinks COVID-19 might impact the target. This is a very broad question. We think diligence in the following areas will be most beneficial and will create the most confidence with underwriters:
- The target’s insurance policies, focusing on business interruption, stop gap health and disability coverage related to welfare plans for employees
- Current business continuity plans
- Supply chain risk and alternative sources of supply
- Key counter parties and their jurisdictions
- Regulatory, licensing, and data compliance implications as a result of remote working
- How they handle unwell employees, especially older ones, compliance with government health guidelines, and the effect of health travel bans
- Ability of target to walk away or suspend material contracts without penalty
Obviously this is a rapidly changing situation. Please do not hesitate to reach out with any specific questions.
Coronavirus and Applicability to Other Coverage
Woodruff Sawyer has been receiving a lot of calls and emails around how all lines of insurance coverage could potentially apply. If you too have been receiving more general insurance coverage inquiries, here is a recorded webinar where we address potential areas of coverage as well as potential exclusionary language that could apply.
Also check out our Coronavirus resource center which contains further information and advice for organizations on protecting their business interests and and supporting employees.
Please feel free to forward these resources to anyone who could find them useful.