COVID-19 and Insurance Coverage: A Follow-Up Look at Recent Developments

The ongoing adjustments from the COVID-19 pandemic continue to affect businesses in a variety of ways. In the days since Holland & Knight's previous alert on the potential impact that the crisis could have on a wide range of insurance coverages (see "A Look at Insurance Coverage Issues Related to COVID-19," March 23, 2020), a number of new developments and legislative efforts have occurred – and more change is expected.

This follow-up alert looks at some of the recent questions, topics and trends in different coverage areas:

Business Interruption Insurance (BI)

• Several lawsuits have already been filed seeking coverage for business interruption losses related to COVID-19.
• It is recommended that insureds talk to their insurance brokers and/or insurance professionals about their chances for coverage. Coverage will depend on the specific language in the insurance policy.
• Several states have considered bills that would require insurers to provide coverage and/or administer coverage. It is not clear whether any of these bills will become law at this time.
• Because of the uncertainty, it is recommended that insureds make claims under their policy as soon as possible and keep track of their losses.
• If a carrier denies coverage, it is advised that insureds reserve their rights and continue to keep track of their losses.
• Failure to track losses may cause an otherwise covered claim to be uncovered.
• Some insureds have asked whether it is better to defer or abate rent, leases, invoices, etc. From an insurance perspective, any abatement or renegotiation of amounts due may be viewed as a business decision and not a loss. As such, it may be safer for a landlord/creditor insured to defer amounts due rather than abate, renegotiate or forgive those obligations.

Directors and Officers Insurance (D&O)

• Lawsuits have already been filed seeking D&O insurance coverage related to COVID-19.
• Prior to renewing D&O coverage, it is critical for insureds to consider whether they have a claim or potential claim as defined by their policy.
• If appropriate, notice should be given to the D&O carrier prior to the policy expiration. Insureds should consult their insurance brokers and/or insurance professionals to determine whether a notice is appropriate.
• Insureds must be very careful about any changes to their D&O coverage at renewal. Some D&O carriers have attempted to add new exclusions, warranty statements or have tried to modify the bodily injury exclusion to exclude COVID-19 claims. Some carriers have also reduced limits or increased the applicable retention.
• If a carrier attempts to modify the insurance contract at renewal, a notice of a potential claim may be advisable.

Cyber Insurance

• There has been a significant increase in activity by hackers since the outbreak, including more phishing activity, more attempts to penetrate firewalls and an increased focus on exploiting work-from-home activities.
• In addition, there has been an increase in unauthorized access to networks by furloughed and terminated employees. Some of this is to copy files, contacts, etc. Some is to download malware.
• Personal computers are at an increased risk as they do not always have the most up-to-date protections.
• There also has been an increase in Health Insurance Portability and Accountability Act (HIPAA)-related claims.
• Insureds are advised to closely monitor these issues and consider whether notice of a claim is appropriate under their policies if issues are detected.
• It is also recommended that insureds avoid any negative changes to the terms and conditions of their policies at renewal (similar to the D&O recommendations above).

Fiduciary and Employment Practices Insurance

• The federal stimulus package proposes several changes to the rules involving layoffs, reductions in force (RIF), 401(k)s, benefit programs, etc.
• In some instances, it may be better from an insurance perspective for the employer to terminate an employee instead of furloughing the employee.
• It may also be better from the employee's perspective since some relief will be conditioned on termination of employment.
• Expect to see an increase in claims against employers that make changes to their 401(k) plans or allow changes to their benefit plans (pursuant to the stimulus package or otherwise).
• It is expected that these developments will result in an increase in fiduciary claims as well as employment practices claims.

Next Steps

With so many novel issues raised by COVID-19 and so many variables in the potentially applicable insurance policies, insureds and insurers are well advised to consult with their insurance brokers and a knowledgeable insurance professional about their coverages.

Many of the issues referenced above will be determined in courts (when they reopen). Until then, Holland & Knight's insurance attorneys are advising clients on ways to preserve their claims and potential claims.

For more information or questions about your organization's specific insurance policy as it relates to the coronavirus, contact Partners Thomas Bentz and John Toriello or another attorney on Holland & Knight's Insurance Industry Team.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact the author or your responsible Holland & Knight lawyer for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.