Reopening Your Business After (or during) a Pandemic: Insurance Issues to Review

By Andy Lax, Updated 5/06/20

If your North Carolina business is currently closed due to the COVID–19 pandemic, at some point – hopefully soon – you will want to attempt to reopen your doors.  Before you do so, however, there are a number of factors to consider, and reopening will be complicated.  

Guidelines for businesses which currently deal with the public are governed by Executive Order 135, issued by Governor Cooper on April 23, 2020.  That order dictates such things as social distancing in the business, occupancy, cleaning procedures, etc.  You can find an explanation of that Order here, which details the phased plan to hopefully allow some businesses to reopen next month. There will be more orders, procedures and practical considerations forthcoming.  One consideration that might not jump to the front of your mind is business insurance. But, in preparing to re-start your business, it is essential to review your insurance policies and their potential impact.  

Potential Claims Against Your Business

At least one lawsuit against a business – a nursing home – has already been filed in North Carolina, alleging that the facility’s negligence led to the virus infecting residents.  There will be more lawsuits, even if the circumstances of nursing homes are somewhat unique. In general, some practical questions for you to consider before reopening your business  are:

1. Is there, or has there been, a known or suspected coronavirus contamination in your business space or common areas?

2. Are you aware of any employees, customers, or clients who have tested positive for coronavirus?

3. Would it be difficult for you to comply with current and (no doubt) new orders and industry standards to reasonably assure workplace virus safety?

If any of those issues are a concern, your “standard of care” for avoiding potential legal liability may be increased.  And even if not, you still face a risk, even if it is a lower risk, of a claim against your business.  Either way, you should review your insurance liability coverage, whether you have a standard Comprehensive General Liability (“CGL”) policy or a more specialized coverage.  A CGL policy will generally cover bodily injury or property damage to a third party that occurs on your business premises or arising out of your business operations.  Most coverages are similar, but there can be meaningful differences between policy coverages. You need to be sure that: (1) you have sufficient insurance coverage for this risk; and (2) your insurance carrier will absorb the cost of defending you if a claim arises.

These concerns can also be impacted by the nature of your business in this COVID-19 era. On May 4, 2020, Governor Cooper signed legislation to provide immunity from civil liability to essential businesses, as set out in the Essential Business Executive Order issued on March 27, 2020, or which are designated essential by the North Carolina Department of Revenue.  For essential businesses, this immunity from liability still has limits.  It pertains only to claims arising out of injury or death related to the coronavirus, and it excludes claims which allege more than negligence, such as acts which are found to constitute gross negligence.  Again, you should review your insurance policies to see what kind of claims would be covered.

Potential Claims By Your Business

Your commercial property insurance may also include coverage to help you recover any damages suffered by your business during the pandemic shutdown.  This kind of insurance is typically referred to as Business Interruption Insurance (“BII”).  

Most insurance carriers will argue that BII coverage only applies if there was physical damage (such as a fire) to your business property that prompted the closure and the resulting business interruption damages. Further, some insurance policies specifically exclude coverage for losses caused by a virus. As a result of the coronavirus, however, it is uncertain whether courts will agree with the insurance industry on those issues.  

For instance, a number of states (not North Carolina at this time) are considering legislation which would broaden the scope of business interruption coverage. In addition, there are some specialized business coverages, such as Contingent Business Interruption insurance, that may apply.  If the coronavirus has shut down or financially impacted your business, you should review all your property and business insurance coverages.

For most people, insurance policies are written in what appears to be a foreign language.  At Forrest Firm, we have attorneys knowledgeable in insurance law who are happy to help analyze your business insurance situation during this volatile time.  Please feel free to reach out at your convenience.