Covering Coronavirus: Risk Considerations

EPIC Risk Advisory Bulletin

Volume 1, Issue 9

The global COVID-19 (coronavirus) pandemic remains both dynamic and fluid. We continue to see unprecedented disruptions at home and abroad. In this issue, we take a focused look at:

1. General Information on Coronavirus
2. Supply Chain and Business Risks
   • Protecting Idle Buildings During Coronavirus Shutdown
   • Shifting Gears? Insurance Considerations
   • Mobile Security Index Report
   • Cargo Theft on the Rise
3. Insurance Products and Coverage Information
   • Lawsuit Tests Limits of Temporary Healthcare Immunity
   • ALIRT Update: Business Interruption Coverage Disputes
   • Legislation and Litigation Roundup 
4. Human Resources and Employee Benefits
   • OSHA’s Interim Enforcement Response Plan
   • Homeland Security’s Modified Document Inspection Process
   • Webinar: CARES Act and Funds for NY Businesses
   • Employee Benefits Insights

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.

General Information on Coronavirus

While the best source for timely information on the coronavirus pandemic remains the Centers for Disease Control (CDC) and the World Health Organization (WHO), EPIC has compiled resources to aid in understanding the impact of the pandemic on employers, their workforces and managing risk.

In addition to the map below, there is an interesting study and interactive model from the Institute for Health Metrics and Evaluation. The study is a state-by-state forecast of health service utilization and deaths due to coronavirus. It projects the day resource use will peak in each U.S. state, and includes hospital bed use, need for intensive care beds, and ventilator use. The model was built using observed death rates from coronavirus and incorporates preventative measures taken by each state.

According to the model, America will reach its peak day on April 15. Hospital beds needed are anticipated to be 140,823, which is a shortage of 36,654 beds. ICU beds needed are expected to be 29,210, which reflects a shortage of 16,323. Additionally, 24,828 invasive ventilators are needed. The site also projects deaths and information is searchable by state. Information is dynamic, so please visit the following link for up to date results. View the study here: https://covid19.healthdata.org/projections

Source: John Hopkins

Supply Chain and Business Risks

Protecting Idle Buildings during Coronavirus Shutdown

With much of North America sheltering in place, properties that once bustled with life are now sitting vacant. Protecting these properties during the shutdown is essential as idle buildings are both alluring targets for criminals and victims of normal, seasonal wear and tear. While buildings might go idle for a time, one’s approach to risk management can never rest.

Property insurance underwriters may view vacant properties as being more exposed to crime such as vandalism and theft, as well as maintenance-related losses, which could include water damage from broken pipes, freezing, unchecked ignition sources causing fires, and more.

Many property insurance policies contain provisions addressing properties that are, or become, vacant. These vacancy clauses can void coverage if a property is deemed to be vacant. The provisions can be triggered by the length of time a property is vacant. Thirty days or sixty days are common triggers.

A vacancy clause could also be triggered by the proportion of the building that is or is not in use. For example, a clause may state that a building is considered to be vacant when less than 30 percent of its total square footage is either rented and/or used to conduct customary operations. It is important to understand the triggers that may invoke any vacancy clauses contained in a property insurance policy, as well as the coverage limiting implications.

The lack of a specific business continuity plan for coronavirus should not stop property owners from taking simple steps to protect their buildings. An existing continuity plan that takes into account steps for safe shutdown due to a weather event such as a hurricane, can be helpful in guiding businesses’ efforts now. Chambers of Commerce provide coronavirus communication toolkits and business preparedness checklists. It is equally important to have a plan in place that addresses facility maintenance needs during dormancy.

Some pointers to keep building/operations safe and make sure that they are ready to receive employees and tenants as soon as they’re ready to return include:

• Notify local authorities that the property has become vacant.
• Assign someone to visit the property daily and visually inspect it.
• Increase the frequency of security patrols to the property.
• Maintain adequate exterior lighting at night.
• Secure exterior and interior doors.
• Update contingency plans and emergency contact information.
• Clear any obstructions away from all access routes to the property.
• Remove any unnecessary storage, combustibles, and flammables. Trash cans and recycling containers should be stored until normal operations resume; store at least 50 feet from the building if they cannot be removed.
• Make provisions to protect any raw material or product (especially those that are sensitive, perishable, etc.). It is best to reduce storage if possible.
• Shutdown any non-critical processes, equipment, and utilities. Use lockout/tagout procedures as required.
• Secure critical information, valuables, drawings, etc. Use fireproof/waterproof safes, back-up data systems, etc.
• Ensure fire sprinkler system valves and fire pump(s) are operational. Ensure system pressures are set in the normal operating range. Read more about fire protection systems here.
• Set HVAC levels to normal range to prevent pipes from freezing during temperature drops.
• Fill fuel tanks that supply critical equipment such as generators and fire pumps.
• Ensure that alarm systems as well as building monitoring systems are working properly and that proper notification chains have been established during these idle periods.
• Check the roof once a month and clear clogged drains.
• Account for potentially unavailable contractors and third-party maintenance vendors.
• Limit access to the facility. If appropriate, block off sections of the parking lot to prevent vehicles from entering the property.

While many of these steps are common sense in nature, they are easy to overlook during a global pandemic. Each one, however, mitigates the risk of crime, vandalism or damage and protects enforcement of commercial property coverages.

Additionally, steps taken now to prepare buildings for the Fall will keep them in proper shape heading into yearly flood and hurricane seasons. Facilities owners can put themselves and their buildings in the best position possible by keeping close watch on them now.

Shifting Gears? Insurance Considerations for Manufacturers and Other Businesses

Small and middle market businesses are adapting their business and service delivery models to survive the shelter-in-place economy. For example, fitness and sports-related companies are releasing virtual coaching sessions and exercise classes. Questions are bubbling up as to whether businesses’ current insurance policies will cover them for claims arising out of their new approach to business. This concern applies to small and larger businesses alike. Unless a business was already fully “on-line,” the commercial insurance products in its portfolio, such as General Liability, Cyber Liability, Errors and Omissions, and Employment Practice Liability, may not adequately protect against risks arising out of providing services virtually or managing a fully remote workforce. One of the key industry verticals being forced to “shift gears” is manufacturing.

Across America, industrial and manufacturing plants that were once humming with activity have suddenly gone silent. The National Association of Manufacturers (NAM) surveyed its members and found that over 78 percent are likely to be financially impacted by the coronavirus outbreak and 53 percent anticipate a change in operations. The latest Empire State Manufacturing Index returned its worst reading in history, a record-low of 78.2. Around the world, supply chains are being disrupted, creating a ripple effect throughout the global manufacturing industry.

Some manufacturers are weathering the storm by changing what they make, including those that are responding to the President’s call to help America deal with the pandemic by producing desperately needed ventilators, masks and other supplies healthcare workers and patients need. Tesla’s CEO Elon Musk announced early on, as one example, that his company’s factory would start making much-needed ventilators.

As companies shift their production lines, risk mitigation is a factor that must not be overlooked. When operations change to manufacture products that fall outside of a facility’s original design, new exposure hazards could be introduced. For example, new raw materials may contain a higher degree of plastics; flammable liquids, such as solvents, could now be needed; or packaging might require more cardboard. A critical consideration is protection systems, such as automatic sprinklers, and ensuring that they are adequately designed to handle to any new exposures.

Physical exposures are not the only risks manufacturers and others should be concerned about. Attention must also be given to safety and cybersecurity risks. As manufacturers enter new lines of production, the potential for virus and cybercrime unique to those lines may catch manufacturers off-guard. A further consideration is the security law enacted in January 2020 in California that covers the security of any internet connected device.

In addition to safety and cybersecurity risks inherent with a product or service change, there are other factors to consider, such as patent infringement. President Trump’s Executive Order invoked the authority of the Defense Production Act and directed the Secretary of Health and Human Services to identify specific health and medical resources, including PPE and ventilators, to respond to the spread of coronavirus. Manufacturers may question whether the Order or the Act shield them from the risk of patent infringement. While a definitive answer is as yet unknown, it appears that the risk will remain. Manufacturers concerned about potential patent infringements could consider contacting patent holders to negotiate temporary licenses, or explore alternative designs that could help avoid patent duplication or violation.

An additional risk in shifting gears is the potential violation of existing commercial property and casualty policy provisions. Material changes in operations may have an impact on the terms, conditions, pricing, and appetite for any new exposure. Current coverage provisions may not extend to new items being manufactured or may expose manufacturers to new liability exposures that were not contemplated at the time coverage incepted. In addition, as relates to the IoT law noted above in California, if the policy has an exclusion for intentional or negligent violation of a statute, and the business is not compliant with the new law, coverage could be impacted.

Relevant underwriters should be notified of any potential material changes in operations, as insurer(s) will want to underwrite the exposure in much the same manner as they would a new acquisition. This is essential as most policies contain a “material changes” provision that requires such notice be provided to the insurer; failing to advise of a material change in operations could have a significant impact on coverage for claims arising out of the change.

Finally, another factor to consider is Workers Compensation class codes, assigned by insurers to generate appropriate rates for specific categories of work. When there is a material change in operations, class codes could change too. This change can impact premiums, as well as how insurers view a particular risk.

All of these risks show the need for businesses to work with insurers to make sure that appropriate coverage is in place. Prior to producing something new or offering new services, businesses should explore all potential new risks with their insurance brokers.

EPIC is here to assist in analyzing any possible coverage gaps and the potential responsiveness of current coverages in place.

Verizon Releases 2020 Mobile Security Index Report

Verizon’s cyber security team recently released its 2020 report on mobile security, which includes industry specific reports outlining the scale of mobile risk. This is a common security issue and the report includes practical advice on improving mobile security.

Highlights of Verizon’s report include the following insights:

• Only 13 percent of businesses surveyed had regular security testing, data encryption, need-to-know access, and no default passwords in place, all four of which Verizon considers to be basic protections.
• Almost 40 percent of organizations surveyed said they experienced a mobile-related security compromise.
• Sixty-six percent of those suffering a mobile compromise reported a major impact and 37 percent said that impact was difficult and expensive to remediate.
• Forty-five percent of organizations surveyed reported that their defenses were behind their attackers’ capabilities.

One interesting takeaway from the report is the fact that while 5G networks are inherently more secure than previous generations of wireless networks, the expected explosion of 5G-based applications will increase the cyber-attack surface. This concept applies to the area where unauthorized users may try to enter data to or extract data from an otherwise secure environment.

Among other efforts, Verizon suggests companies should implement acceptable use policies to guide standards for employee behavior around company networks, data and mobile devices, something it found nearly half of survey respondents did not have in place. The Healthcare Information and Management Systems Society released its 2019 HIMSS Cybersecurity Survey highlighting that only 40 percent of responding healthcare organizations purchase cyber coverage, revealing a potential risk.

The full report, as well as breakouts for the financial services, retail, manufacturing and healthcare industries, can be accessed on Verizon’s site at enterprise.verizon.com

Cargo Theft Threat Level Continues to Rise

CargoNet had recently categorized the cargo theft threat level at high. This has now progressed to the extreme category, requiring vigilance to protect the nation’s supply chain. Consumers pay a 20 percent markup on everything purchased because of cargo theft, and the costly exposures associated with theft during this pandemic are more profound.

Professional thieves are using the pandemic to their advantage – in the past week, 33 incidents were reported nationwide. CargoNet expects to see the trend of cargo theft and looting of businesses increase over the next several weeks. Medical supplies, such as surgical masks and gloves, as well as food and beverage and essential household items, are likely to be targeted. EPIC’s Cargo Theft Advisory provides useful security tips

Insurance Products & Coverage

Suit Tests Limits of Temporary Immunity for Healthcare Providers

On March 7, New York’s Governor issued Executive Order 202.10, which granted temporary immunity from ordinary negligence for physicians, physician assistants, specialist assistants, nurse practitioners, licensed registered professional nurses and licensed practical nurses. Unless extended, that immunity is set to expire on April 22, 2020. While the executive order grants temporary protection from civil liability arising out of treatment related to coronavirus, for any injury or death alleged to have been sustained as a result of any act or omission on the part of a medical professional, all healthcare entities are not necessarily immune. And, perhaps more importantly, the Order does not and will not prevent lawsuits from being filed.

A case filed by the New York State Nurses Association (NYSNA) on Monday, April 20, alleges that the New York Department of Health and two hospital systems are creating dangerous working conditions that put nurses’ health, safety and lives at risk. As a union-based action, NYSNA seeks injunctive relief, which circumvents the temporary immunity provisions.

The case is a reminder to all health care providers that the immunity issued is a qualified one that does not preclude the possibility of lawsuits being brought against them.

Read the full case here: courthousenews.com

ALIRT Update: Business Interruption Coverage Disputes

ALIRT Insurance Research, an independent insurance industry financial analysis firm, has prepared an update on Business Interruption coverage disputes as relates to smaller businesses. A number of lawsuits have already been filed against insurers, with the outcome dependent upon the courts’ interpretation of the policy wording. It is the position of insurers that a pandemic was not intended to be a covered event, not unlike war or terrorism, contending these losses should look to government-backstopped programs.

Read more in this special ALIRT bulletin and note several links below that relate to this issue.

Legislation and Litigation Roundup

The passage of another week has brought forth more legislation from city, county and state governmental bodies, as well as litigation. Here is a rundown of recent news stories of interest.

News of Note

• Insurer Beazley Estimates $170 Million in Coronavirus Claims, Reuters.com, Apr 22
• Travelers Fires Back Against Law Firm Suing for Business Interruption Cover, Insurance Business Magazine, Apr 21
• Six Insurers Face Federal Class Action Lawsuits for Denying Business Interruption Claims, Insurance Business Magazine, Apr 20
• How Workers’ Comp Carriers are Responding to the Pandemic, Insurance Business Magazine, Apr 16
• Business Interruption Insurance in the Time of COVID-19, National Law Review, Apr 14
• COVID-19 Response Could Bankrupt the Insurance Industry, Reuters, Apr 14

HR & Employee Benefits Insights

OSHA Announces Interim Enforcement Response Plan

The newly released plan provides instructions and guidance to OSHA Area Offices and Compliance Safety and Health Officers (CSHOs) for handling coronavirus-related complaints, referrals and severe illness reports.

Additionally, it outlines procedures for addressing reports of workplace hazards related to coronavirus. Fatalities and imminent danger exposures related to coronavirus will be prioritized for onsite inspections. The response plan contains procedures and sample documentation for CSHOs to use during coronavirus-related inspections. Workers requesting inspections, complaining of coronavirus exposure, or reporting illnesses may be protected under one or more whistleblower statues and will be informed of their protections from retaliation.

Highlights of the plan include the following:

• The focus and priority for onsite inspections will be in healthcare. Everyone in the high risk categories may not get a complaint letter, RRI request or hazard alert letter.
• Imminent danger situations are prioritized for inspections, yet no guidance is provided on what may constitute imminent danger in the current environment.
• CSHOs are to conduct as much of their inspections as possible off site by phone witness interviews, email document requests, and requests for video footage.
• OSHA will be looking for compliance with respiratory protection, PPE, blood borne pathogens, and recordkeeping. If CDC guidance is not being followed, OSHA will consider citations under the General Duty Clause.
• All COVID-19 proposed citations must be reviewed by the National Office.

OSHA also published a series of alerts for industries, including an alert for the logistics industry and an alert for the manufacturing industry that outlines tips to reduce the risk of exposure to coronavirus. Some of those tips include the following:

• Encourage workers to stay home if they are sick.
• Establish flexible work hours where feasible.
• Practice sensible social distancing and maintain six feet between co-workers where possible.
• Encourage respiratory etiquette, including covering of coughs and sneezes.
• Promote personal hygiene.
• Allow workers to wear masks over their nose and mouth.
• Discourage workers from sharing tools and equipment.
• Use EPA approved cleaning chemicals from List N or that have label claims against coronavirus.
• Encourage workers to report any safety and health concerns.

For more information regarding OSHA’s interim enforcement response plan, as well as resources, procedures and sample documentation, visit OSHA’s site at osha.gov

DHS Releases Modified Document Inspection Process

The Department of Homeland Security (DHS) has modified its requirements related to Form I-9 compliance for employers and workplaces operating remotely due to coronavirus. It will defer physical presence and physical inspection requirements associated with the verification of the List of Acceptable documents to allow social distancing guidelines to be followed.

Employers must take a number of steps to enact the deferment. Read the full guidance and determine the steps on ICE’s site: ice.gov

Webinar: the CARES Act and Funds for Businesses in NY

In this pre-recorded webinar, Partners at Cook Maran, an EPIC Company, invited Kevin Santacroce (Chief Lending Officer and EVP at BNB Bank) and Joe Indusi (Lawyer and Partner at Russo, Karl, Widmaier & Cordano) to answer questions about the CARES Act. The speakers answer questions about grants and loans available to small businesses in the New York metropolitan area through the CARES Act, and provide information on funds that are available and how to access them.

View the brief webinar on EPIC’s website.

Employee Benefits Insights

EPIC’s employee benefits leaders have written numerous articles on matters related to coronavirus and employee benefits, all of which are available on EPIC’s website. These articles include:

• San Jose Enacts COVID-19 Paid Sick Leave Ordinance (Apr 20)
• Departments Release More FAQ to Address Leaves Under FFCRA (Apr 20)
• San Francisco Law Enacts Emergency Paid Sick Leave Law (Apr 20)
• Coronavirus & Workplace Well-being: Primary Care and Chronic Condition Management (Apr 20)
• One Tiny Bright Light in This Crisis – Telemedicine (Apr 16)
• The CARES Act: Accessing Available Funds for Businesses (April 15)
• COVID-19: New York Emergency Regulation (Apr 15)
• Identity Theft Protection (Apr 15)
• Notarizing and Executing Legal Documents While We Shelter in Place (Apr15)

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. </small class>

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