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The Insurance Industry’s Response to COVID-19 and the Impacts on Dealerships

The Insurance Industry’s Response to COVID-19 and the Impacts on Dealerships

The Insurance Industry’s Response to COVID-19 and the Impacts it has on your Dealership

The global impacts of Coronavirus, COVID-19, are far-and-wide. Organizations are being forced to make significant changes to their business models and supply chains overnight. Business travel has been restricted and many service industry businesses have taken steps to have their employees work remotely.

The Insurance Markets are feeling the impacts of COVID-19 as well. The emergence of a pandemic threat is making the industry rethink how coverage responds to businesses that will sustain millions of dollars in economic loss. Let’s examine the current policies and review future changes in the Insurance Markets as they respond to the pandemic.

The types of coverage that may apply to your Dealership:

Property

COVID-19 is likely to inspire policyholders to evaluate their coverages and seek relief from Business Interruption Losses. Unfortunately, it’s expected that most Dealership policies won’t be triggered by COVID-19 as losses due to pandemic-related shutdowns do not meet the physical damage requirements inherent in standard property policies. Insurance policies respond to specific Named Perils and trigger coverage accordingly. Even mandated closures by Governmental Authorities typically require the ‘’proximate cause’’ of the closure to be a covered peril.

Moving forward, Dealerships and Businesses will need to evaluate their policy language and coverage triggers to see if they’ll be able to successfully file a claim due to the wide variety of potential events such as the current pandemic.

Workers’ Compensation

Workers Compensation coverage is explicitly designed to provide Medical and Loss of Wage coverage for injuries or disease employees sustain at the workplace. It is widely believed that the coverage should extend to COVID-19 under the following circumstances:

  • – Arising out of and in the course of employment
  • – Be proven to be the result of workplace exposure
  • – Due to employment that places the employee at a substantially greater risk of contracting the disease or condition than the risk experienced by the general public

Healthcare professions and clinics treating COVID-19 patients should be properly notified if the employee’s illness was potentially contracted at the workplace.

Management Liability

The exposure from a Management Liability perspective is much broader than what initially appears. As businesses are affected by reductions in revenues, reactions like terminations need to be handled carefully. It would be prudent to engage Counsel to ensure staff reductions are handled properly and allegations of wrongful termination are minimized. Additionally, managers should be briefed on how to handle employees that are or appear to be ill at the workplace.

People worldwide are experiencing tremendous anxiety, and business closures will affect all employees… especially hourly individuals and those reliant upon commission income from sales. How Management handles the situation is critical in the continuation of solid employer/employee relationships and potential litigation.

With the stock market in turmoil, it is essential, from a fiduciary perspective, to use caution when making changes to 401K and retirement plans. The prudence exercised when initiating the plan should be considered, and ‘’knee jerk’’ reactions should be minimized.

It’s a good time to meet with the Management Team, review of the policy verbiage for Employment Practice Liability, Directors and Officers Liability and Fiduciary Liability coverage and make sure Management decisions are made appropriately and with as much transparency as possible.

What’s Next? Emerging Exclusions, Coverage Options, and Claims

Over the next few months, the carriers will respond with definitive coverage positions outlining the denial or rare acceptance of Business Interruption claims resulting from COVID-19. Moving forward, we expect the insurance industry to create property coverage extensions that includes coverage for business interruption losses resulting from mandated closures by a governmental agency intended to mitigate the spread of infectious disease.

The Bottom Line

The COVID-19 outbreak shows the complexity that is the Insurance Industry and the importance of having agents behind you that you can trust explain what is and is not covered. No one knows how prevalent this outbreak will become, and hazards can affect business operations differently. However, after experiencing multiple global catastrophic events including hurricanes, wildfires, and previous outbreaks across the last decade, carriers have gained valuable experience handling unexpected events affecting large populations. Their ability to craft coverage and create new policy forms will prove hugely beneficial with future events of this kind.

Together we will get through this pandemic. If you have any questions regarding your policy or would like a policy check-up for your Dealership, send us a message or contact one of our Senior Agents at:

Steven Gibson

Steven Gibson

President of Dealer Risk Services

Philippa Wood

Philippa Wood

Senior Commercial Account Manager

 

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