Covering Coronavirus: Risk Considerations

EPIC Risk Advisory Bulletin

Volume 1, Issue 29

In this issue, we take a focused look at:

1. Supply Chain and Business Risks
   • How Will Supply Chains Respond to Vaccine Distribution?
   • Equipment Maintenance Program Creates Savings for Hospitals
2. Insurance Products and Coverage Information
   • Business Interruption Update
   • More D&O Liability Suits Stem From Coronavirus Claims
   • Presumptive Compensability Update
   • News of Note
3. Human Resources and Employee Benefits
   • Webinar: Cal-OSHA Coronavirus Preparation Program
   • Webinar: How to Prepare for AB 685
   • IRS Issues Final Rule on Commuter Benefits
   • CDC Guidelines for Parents & Caregivers
   • Cal/OSHA Emergency Regulation Now in Effect
   • Holiday Safety Guidelines
   • Insights from Across the Firm

The information presented here is intended to provide a high level overview of critical areas of concern for businesses around coronavirus. Consult your EPIC insurance broker for more in-depth guidance.

Supply Chain & Business Risks

How Will Supply Chains Respond to Coronavirus Vaccine Distribution?

Humanity has achieved a remarkable and unprecedented feat – vaccines for coronavirus are being deployed around the globe a mere nine months after the virus took the world by storm. In America, health care workers began receiving the first doses of the Pfizer/BioNTech coronavirus vaccine on Monday, December 14. FedEx and UPS began shipping nearly 3 million doses of the vaccine from Pfizer plants to hospitals, clinics and other distribution sites as part of the largest and most complex vaccination drive in U.S. history.

While other vaccines are expected to come to market, Pfizer’s is fragile and requires special treatment under precise time and temperature requirements. Vaccine shipments will receive priority access at airports and planes with passengers will need to circle and wait to allow planes carrying vaccine doses to land and be received first. One suitcase-sized box of vaccines carries anywhere from 1,000 to 5,000 doses, which must be kept at minus 94 degrees Fahrenheit, on dry ice.

FedEx and UPS designed custom thermal shippers to safely transport the vaccine, shipped out inoculation supplies, ramped up production of dry ice, and built “freezer farms” in preparation for the vaccine’s release and distribution. Doses can last for up to thirty days in thermal shippers, so long as the shippers are not opened more than twice a day and less than a minute at a time.

Richard Smith, executive vice president of FedEx Express, expressed confidence in his and rival shipper UPS’ ability to distribute the vaccine, saying on c-span, “the reason we’re both here and we’re both doing this is because we’re the only ones that can. We have the capability to serve every ZIP code in the United State of America. This is what our network was built to do.”

Leaders from the two companies assured a Senate transportation subcommittee on December 10 that they could handle the influx of vaccine shipments, citing their decision to hire an additional 170,000 employees as proof of their readiness. Ahead of that meeting, the American Trucking Associations and a coalition of transportation organizations sent a letter to the leaders of the full panel and subcommittee asking that industry workers — including freight, rail, port and waterway, and energy workers— “have timely access to the COVID-19 vaccine to minimize the potential for supply chain disruptions, delays in vaccine distribution, and further adverse economic impacts, locally, regionally, and nationally.”

It remains to be seen whether transportation workers will be considered “essential;” after health care workers, states are determining how to allocated doses and leaders in the food, restaurant, aviation and utility industries are all vying for their workers to be next in line.

Additional Challenges to Vaccine Distribution

President Elect Joseph R. Biden has announced ambitious goals to affect the outcome of the pandemic in America, including getting at least 100 million coronavirus vaccine doses into the arms of American people during his first 100 days in office. Mr. Biden did not say how and through whom his administration would purchase vaccine doses. Ramping up production and distribution of that volume of vaccine shipments will present a critical challenge to supply chain leaders, who will have to establish resourcing and distribution best practices.

Moving people and packages from hubs to final destinations (final-mile requirements) in particular will test the agility and resilience of existing supply chains as the vaccine distribution encompasses rural areas. Potential risks include suboptimal logistics and transportation infrastructure, data communication network capabilities, security, local regulatory and trade management demands, and weather.

Another concern is with security. While both UPS and FedEx are using high-tech tracking devices to monitor vaccine shipments that include motion detection, light exposure, temperature and GPS, cyber attacks have already been waged on the distribution infrastructure, including a cold-chain storage company. Hackers were able to access documents related to approved vaccines after attacking the European Medicines Agency and cyber criminals from China, Russia and North Korea have targeted pharmaceutical firms developing vaccines.

There are numerous links along a complicated supply delivery chain and every one of them must work for the vaccine to be distributed successfully. With coronavirus cases expected to peak in mid-January, Americans will need every one of the links to hold.

Contact an EPIC transportation and logistics team member for more information.

Equipment Maintenance Program Creates Savings for Hospitals

Even before the onset of the coronavirus pandemic, many hospitals were facing daunting financial, regulatory and managerial challenges. In the months since, those challenges have only intensified for hospitals and healthcare organizations of every size. An estimated 28 percent of U.S. hospitals are losing money amid growing declines in admissions and patient visits caused by coronavirus infection rates; 28 percent of hospitals analyzed by Strata Decision Technology had negative operating margins. Across America, people are delaying procedures to avoid coming in contact with the virus, which is further derailing hospitals’ efforts to regain revenue lost during the early months of the pandemic, when a moratorium on elective surgeries and procedures was issued.

With the American Hospital Association estimating that hospitals will lose over $323 billion this year from issues related to the virus, and many hospitals temporarily or permanently reducing the size of their staff, leaders at these organizations are understandably looking for cost savings opportunities wherever they can be found.

One opportunity to reduce expenses and create efficiencies comes with the implementation of an equipment maintenance management program. Edgewood Healthcare Advisors’ Asset Lifecycle Management Managing Principals Tony Gerrato and John Bowman are helping healthcare executives realize 15 to 25 percent cost savings by consolidating existing service contracts into one comprehensive program.

“We understand hospitals and healthcare organizations need to make up for budget shortfalls wherever possible,” says Gerrato. “By centralizing the management of service agreements for clinical imaging equipment including MRI, X-Ray, and CT scanners, as well as servers, phone systems, microscopes, projectors, printers, alarm systems, and PCs, we were able to help one healthcare system save $281,520 in the first year. Those savings will only grow as more service agreements are consolidated into the master program.”

Gerrato and Bowman say the program is appealing to healthcare executives because it allows them to realize savings without cutting staff or experience any changes in their existing service levels.

“Executives also appreciate the savings in soft costs this program creates as well,” says Bowman. “There’s less internal administration, no negotiating contracts going forward and it’s easier to hold vendors accountable with the verifiable service reports provided by the program.”

Customized quotes are available and require only copies of current service agreements with current pricing and terms and conditions to create. Contact Tony Gerrato at or John Bowman at for more information.

Insurance Products & Coverage

Business Interruption Update

Across the country, courts continue to disagree as to whether or not losses arising from the pandemic constitute physical loss or damage. While insurers systematically are refusing to pay-out business interruption claims by asserting that the virus does not constitute physical loss, policyholders point to the physical nature of the virus and associated forced closures of property as grounds for payment of policy benefits.

Currently, there are 20 cases that have been decided in favor of policyholders. As an example, a North Carolina judge granted partial summary judgment in favor of restaurants for financial losses associated with that state’s mandated coronavirus restaurant shut-down, and provided a new interpretation of the phrase, “direct physical loss.” The judge ruled that direct physical loss is triggered by an inability to use, not by a physical alteration. Further, the judge reasoned that if loss is synonymous only with physical change, it would render meaningless accidental physical loss and damage language in business interruption policies.

More recently, a Florida federal judge dismissed with prejudice a suit brought by Florida restaurants against Lloyd’s of London underwriters for business interruption coverage because it lacked allegations of physical damage. In her opinion, the judge noted that federal district courts across America have dismissed substantially similar lawsuits for failing to state a claim for business income coverage.

Elsewhere, plaintiffs have tried, unsuccessfully, to recover business interruption losses through pollution liability policies. An Arizona federal district court ruled in favor of Chubb Ltd, holding that an overly broad definition of pollution (i.e., one that includes a coronavirus outbreak as traditional environmental pollution) could surpass what is reasonably expected to be insured. Policy language again was critical, as the judge ruled that a virus outbreak does not resemble enumerated examples in the policy’s definition.

On the legislation front, efforts continue to create a federal backstop to aid business owners in future pandemics. While a hearing was held on November 19 to advance the Pandemic Risk Insurance Act, opposition from republicans and insurers continues to halt progress. On a state level, efforts continue to provide relief for struggling retailers and businesses in the hospitality industry, which have been particularly hard hit during the pandemic.

In Albany, two legislators introduced a package of bills to provide relief to bars, restaurants and hotels. Bill AB10226/SB8211A would require certain perils to be covered under business interruption insurance during the pandemic. The bill is supported by a variety of nonprofit and other organizations. Other legislation in New York would create a Hospitality Relief Fund, requiring all insurers that issue commercial general liability policies in that state to contribute to a fund for affected businesses. Another bill requires insurers to provide a credit back to businesses in an amount to be determined that reflects dramatically reduced risk carried in 2020.

Contact an EPIC broker for more information.

More D&O Liability Suits Stem From Coronavirus Claims

One fallout from the pandemic has been an increasing number of suits arising from event-driven litigation. This represents a new kind of securities class action relying on particular adverse events, rather than fraudulent financial disclosures, as a catalyst for targeting companies and their directors and officers for a drop in stock price. The pandemic has created havoc in the professional liability market overall, and AM Best recently reported increased pressure on D&O renewal pricing resulting in hardened rates and more restrictive terms and conditions.

While the Cheesecake Factory agreeing to pay a fine of $125,000 to settle Security and Exchange Commission charges of misleading investors about the toll the pandemic has taken on its business is the most recent, prominent example, another case involves a class action lawsuit against Norwegian Cruise Line Holdings. It alleges that the cruise line made false and misleading statements or failed to disclose in its securities filings sales tactics that included misinformation about coronavirus while encouraging customers to purchase cruises.

It remains to be seen whether or not payouts from D&O or other management liability coverage will be triggered by the suits. D&O policies are primarily designed to protect directors and officers from personal liability for claims against them that arise out of the course of their duties for their companies. However, most D&O policies also provide entity coverage, which insures the insured company for direct claims made against it. The outcome will likely depend on policy language, and highlights the importance of having sufficient, broad D&O coverage in place to include defense costs. The evolving nature of this trend is critical in mitigating this evolving risk. Contact an EPIC broker for more information.

Presumptive Compensability Legislation

A new survey from the National Council on Compensation Insurance (NCCI) found that the impact of the coronavirus pandemic on the workers’ compensation industry is compensation insurance executives’ chief concern heading into 2021. Nearly two-thirds of the 100 insurance executives surveyed said they are most concerned about not knowing when the pandemic will end, and about the number and size of coronavirus-related workers’ compensation claims.

They also expressed concern over how long it will take the economy to recover and workers to be able to resume their pre-pandemic workload, schedules and environment. Their remaining concerns included:

• Will coronavirus compensability presumptions enacted at the state level become permanent or be applied to other diseases and viruses
• How to evaluate risk now and how the pandemic will overlap with several years of declining loss costs
• How work-from-home setups will translate into compensable injuries and overall worker safety.

With coronavirus cases exploding across America, employers are particularly concerned about rising medical costs for workers with coronavirus-related compensation claims. Those costs are averaging nearly $40,000 per claim when it involves hospitalization. NCCI found that through the end of June, nearly 1,200 coronavirus medical claims had been reported in workers’ compensation, and 20 percent of those claims required hospitalization; 19 percent of hospitalization cases included time spent in an intensive care unit.

Strikingly, out of every 100,000 active workers’ compensation claims, coronavirus-related medical claims accounted for only 200. NCCI researchers found that new workers’ compensation claims dropped 15 percent from the first quarter of the year to the second, and active claims dropped 18 percent over that same time period.

For more information, contact an EPIC broker.

News of Note

The passage of another two weeks has brought forth more developments across the insurance world. Here is a rundown of recent news stories of interest.

• Coronavirus litigation – the week in review, Law 360, Dec. 18
• BI insurance update – FCA publishes draft guidance on proving presence of coronavirus, National Law Review, Dec. 15
• Will coronavirus be the death of cities?, Wall Street Journal, Dec. 10
• Insurance scams up in pandemic, Business Insurance, Dec.10
• Ohio to begin distribution of $5B comp dividend, Business Insurance, Dec. 9
• These major retailers are spending millions of dollars to show employees appreciation, yahoo! finance, Dec. 4
• Vaccine costs aren’t likely to break the banks of corporate health plan sponsors, Dec. 3

HR & Employee Benefits Insights

Webinar: Cal/OSHA Coronavirus Preparation Program

On November 30, 2020, Cal-OSHA passed an emergency coronavirus regulation that requires employers throughout the state to implement a written Coronavirus Prevention Program (CPP). In this webinar, the speakers will discuss how to prepare the required Program, including:

• Coronavirus Prevention Program Elements
• Program Implementation
• Testing and Tracing
• Notice Scenarios
• Compliance

Take a deep dive into the necessary details of the CPP, addressing employer duties and responsibilities, outbreaks, and important recordkeeping and reporting requirements in this free webinar from EPIC and Ogletree Deakins.

To learn more or to register, visit our Event Page 

Webinar: How to Prepare for AB 685

California Assembly Bill 685 enhances Cal/OSHA’s enforcement of coronavirus infection prevention requirements by allowing for Orders Prohibiting Use (OPU) and citations for serious violations related to coronavirus to be issued more quickly. EPIC and Hanna Brophy, California’s original workers’ compensation defense firm, recently presented a webinar to help employers prepare to adhere to and implement the changes required by AB 685. Topics covered include:

• AB 685 and Employers’ Reporting Requirements
• Compliance Related to Coronavirus
• OSHA Citations, Serious Violations and OPU/Worksite Shut Downs
• Safety Measure Requirements
• Employee & Local Public Health Agency Notifications
• Overlap of SB 1159 and AB 685

Download the recording

Contact an EPIC team member for more information.

IRS Issues Final Rules on Commuter Benefits in Light of Coronavirus

The IRS has released a document explaining whether unused public transportation benefits can be applied to a parking account, in light of the coronavirus pandemic stalling public transportation and increasing remote work situations. The letter says that unused compensation reduction amounts can be carried over to subsequent periods under an employer’s plan and be used for future commuting expenses. The stipulations mandate that the employee make a valid compensation reduction election and remain employed by the employer.

Unused amounts may also be applied to another qualified transportation option, including qualified parking, so long as that benefit is offered under the employer’s plan and the maximum monthly amount for that benefit is not exceeded. The letter makes clear that qualified transportation plan rules do not allow refunds of qualified transportation fringe benefits provided through a compensation reduction agreement.

Unlike rules governing health flexible spending accounts, the IRS’ qualified transportation plan rules place few restrictions on compensation reduction election changes. Whether or not an employee can take advantage of such flexibility depends on the terms of their specific employer plan.

The ruling provides some relief for businesses in terms of how they can calculate the amount of employee parking that can no longer be deducted under changes made in 2017 tax law. According to Law 360 Tax Authority, businesses may calculate the disallowance for reserved employee spots, determine the primary use of the remaining spots, calculate the allowance for reserved nonemployee spots and make a determination of the remaining use and allocable expenses.

Contact an EPIC team member for more information.

CDC Guidelines for Parents & Caregivers

At this writing, over 17 million people in the U.S. have had confirmed coronavirus infections and more than 310,000 have died from the virus. Nearly 200,000 new cases are reported daily in America now. This reality presents an ongoing challenge for employers whose workers will continue to need flexible work policies and when possible, remote work environments.

For many families, school will continue to look different in early 2021 than it has in previous years. The CDC released checklists on December 7 to help parents, guardians, and caregivers, plan and prepare for school re-opening and more. The documents include guidance on:

• Wearing masks in schools
• Screening students for symptoms
• Cleaning, disinfection and hand hygiene
• Protecting school staff from the virus
• Testing in K-12 schools
• Case investigation and contact tracing in schools

Access that guidance as well as the CDC’s K-12 Mitigation Toolkit 

It remains critical to monitor states’ “Closure/Reopening Orders” and “Orders and Guidance to Screen Employees for COVID-19 and to Provide Protective Measures,” available below:

• Coronavirus Closure and Reopening Orders – States and Major Municipalities | Updated 12/7/2020
• Orders and Guidance to Screen Employees for Coronavirus and to Provide Protective Measures | Updated 12/4/20

Cal/OSHA Emergency Regulations Now in Effect

Cal/OSHA’s emergency regulations requiring employers to protect workers from hazards related to coronavirus are now in effect. The emergency standards apply to most workers in California not covered by Cal/OSHA’s Aerosol Transmissible Diseases standard. The regulations require that employers:

• Communicate to employees about coronavirus prevention procedures
• Identify, evaluate and correct coronavirus hazards
• Enforce physical distancing of at least six feet unless it is not possible
• Use face coverings
• Use engineering controls, administrative controls and personal protective equipment as required to reduce transmission risk
• Implement procedures to investigate and respond to coronavirus cases in the workplace
• Provide coronavirus training to employees
• Provide testing to employees who are exposed to a coronavirus case, and in the case of multiple infections or a major outbreak, implement regular workplace testing for employees in the exposed work areas
• Exclude exposed employees from the workplace until they are no longer an infection risk
• Maintain records of coronavirus cases and report serious illnesses and multiple cases to Cal/OSHA and the local health department

Cal/OSHA has made available a template, “Model COVID-19 Prevention Program (CPP)”, for employers to use to create or update their programs. This is available on its website along with answers to frequently asked questions about the Emergency Temporary Standards (ETS).

Holiday Celebration Safety Guidelines

With Christmas fast approaching, top health officials are concerned that holiday celebrations could result in more coronavirus infections than at Thanksgiving. More than 200,000 Americans are testing positive for the coronavirus every day on average, according to a CNBC analysis of Johns Hopkins University data.

The CDC says the safest way to celebrate winter holidays is to celebrate at home with immediate household members. Staying home, they say, is the best way to prevent the spread of the virus. Travel may increase the chance of spreading and contracting coronavirus and is not recommended, particularly if answers to the following questions are yes:

• Are you, someone in your household, or someone you will be visiting at increased risk for getting very sick from coronavirus?
• Are cases high or increasing in your community or destination? This increases the chance to get and spread coronavirus as a result of door-to-door travel. Check the CDC’s COVID Data Tracker for the latest number of cases in each area.
• Are hospitals in your community or destination overwhelmed with patients who have coronavirus? To find out, check state and local public health department websites.
• Does your home or destination have requirements or restrictions for travelers? Check state and local requirements before you travel.
• During the 14 days before your travel, have you or those you are visiting had close contact with people outside normal households?
• Do your plans include traveling by bus, train, or airplane, which might make staying 6 feet apart difficult?
• Are you traveling with people who don’t live with you?

The CDC offers more guidance about holiday travel on its site, including:

• 12 ways to have a healthy holiday season

For more information, contact and EPIC team member.

Insights From Across the Firm

EPIC thought leaders have written numerous articles on matters relating to coronavirus, all of which are available on EPIC’s website. The most recent articles include:

• Federal Government Ordered to Power Down Servers, December 15
• Know, Feel, Do: Helping Employee Make the Decision That’s Right for Them, December 14
• Projecting 2021 Medical Costs Now That the Vaccine is Here, December 11
• Edgewood Healthcare Appointed VIP with the Florida Society of Plastic Surgeons, December 9
• “Mental Health” Focus – Trend or Here to Stay, December 8
• Vaccine Costs Aren’t Likely to Break the Banks of Corporate Health Plan Sponsors, December 3

Conclusion

Our understanding of coronavirus and its impact around the world continues to evolve at a rapid pace. This newsletter briefly touches on issues that businesses may want to consider as they approach their response to novel coronavirus. More topics will be considered in future issues as our understanding of the virus and its impact continues to evolve. Please reach out to your EPIC broker for more information.

For all of EPIC’s coronavirus coverage, visit epicbrokers.com/coronavirus 

Disclaimer: This has been provided as an informational resource for EPIC clients and business partners. It is intended to provide general guidance on potential exposures and is not intended to provide medical advice or address medical concerns or specific risk circumstances. Due to the dynamic nature of infectious diseases, EPIC cannot be held liable for the guidance provided. We strongly encourage readers to seek additional safety, medical and epidemiological information from credible sources such as the Centers for Disease Control and Prevention and the World Health Organization. Regarding insurance coverage questions, whether coverage applies or a policy will respond to any risk or circumstance is subject to the specific terms and conditions of the policies and contracts at issue and underwriter determinations. 

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