The World Health Organization (WHO) has designated the outbreakof the 2019 Novel Coronavirus, dubbed Covid-19 on Tuesday, aninternational public health emergency. The outbreak is not confinedby national borders and increasingly looks like a pandemic, withmore than 1,100 people dead and 45,000 infected across 27countries. Hundreds of Americans have been evacuated from China,and the U.S. Centers for Disease Control and Prevention (CDC) hasissued a Level 3 travel warning, advising that all nonessentialtravel to China be avoided due to the ongoing outbreak.

As a hub for international travel and tourism, South Floridabusinesses are hardly immune from the economic consequences of thisepidemic. Around the world, travel and events have been postponedor canceled and supply chains have been disrupted. For example, 10percent of the worldwide supply of flat panels for televisions andother electronic devices are manufactured in Wuhan, China (thevirus's epicenter), suggesting an imminent impact on electronicsmanufacturing.

Automaker Hyundai announced that it will idle plants in SouthKorea due to a shortage of components. Starbucks announced theclosure of more than 2,000 cafes in China, while McDonald's hasclosed 300 stores in China's Hubei province.

Just as South Florida had to deal with the impact of the Zikavirus several years ago, the financial toll is mounting, andaffected businesses are looking for ways to offset losses.Insurance may provide a source of relief, and a variety ofcoverages may respond for losses associated with the outbreak.

Business Interruption and Supply Chain Disruptions

Business disruptions due to the coronavirus can create financialproblems for policyholders. Commercial property insurance policiescover losses of business income but frequently require some type ofphysical damage to covered property.

In certain instances, coverage may be available where theinterruption is due to other causes, such as orders from a civilauthority. For instance, access to the insured's business may beprohibited by federal emergency management directives, such asthose provided under the Stafford Act, the Homeland Security Act of2002, and the National Incident Management System. Even where theinsured business is interrupted from a civil authority order,however, many property insurance policies require that the civilauthority order result from some physical damage to property.

Importantly, the law is not settled on what constitutes a"physical loss," as cases throughout the country hold thatcontamination and other incidents that render propertyuninhabitable or unfit for its intended use are sufficient. Whetherthere is "physical loss" must be determined on a case-by-case basisunder the facts and applicable policy language.

Event Cancellation Insurance

Many businesses and organizations hosting events—particularlythose involving attendees, performers, or presenters from China—maycancel or postpone those events due to concerns about thecoronavirus.

Impacted businesses may be able to recover under eventcancellation insurance policies for, among other things, lostprofits and revenue; amounts paid to reimburse vendors,ticketholders, or other third parties due to the canceled event;and additional amounts that must be spent to host the event at analternative time or place.

Coverage is also potentially available for out-of-pocket orunexpected costs, lost advertising, lost ticket sales, or othercontractual obligations a business must pay as a result of thecanceled event. But policyholders must still be on the lookout forpolicy exclusions for communicable diseases and restrictionslimiting coverage to necessary cancellations due to a governmentorder.

General Liability Insurance

Commercial general liability (CGL) insurance policiesprovide coverage for liability to third parties for bodily injuryand property damage, as well as claims concerning privacy and otherpersonal injuries. With thousands suffering bodily injury due tothe coronavirus, the procedures that businesses implement to warnand protect against exposure to the coronavirus may become apotential liability.

For example, retail, travel, entertainment, and hospitalitybusinesses may face claims by customers alleging that the companieswere negligent in failing to warn of or protect against the risk ofexposure to the outbreak. These businesses may look to their CGLpolicies to provide coverage for such claims. Insurers may seek torely on exclusions for exposure to viruses, bacteria, orpollutants, but such exclusions must be evaluated on an individualbasis.  A myriad of arguments are available topolicyholders to overcome these provisions.

D&O Insurance

In addition to third-party claims targeting businesses directly,a company's directors and officers may be subjected to shareholdersuits alleging that unreasonable actions (or inaction) in responseto the coronavirus caused the company economic loss. For example,federal securities laws may require certain disclosures by publiclyheld companies potentially affected by the spread of thecoronavirus. As a result, there is a risk that shareholders mayallege executives and management failed to disclose risks posed bythe coronavirus to the business's financial performance, failed toobserve protocols recommended by authorities, or failed to developadequate contingency plans.

Directors and officers (D&O) insurance policies mayprovide coverage for these types of costs and liabilities. Althoughsuch policies generally exclude claims for bodily injury, suchexclusions should not preclude coverage for shareholders' economicloss claims that allegedly stem from management-level decisions. Aswith other potentially implicated coverage, the availability ofcoverage may turn on the precise wording of the policies atissue.

No matter the type of insurance policy under which a businessseeks coverage for coronavirus-related losses, coverage will dependon the specific policy language and factual circumstances at issue.Policy conditions, such as the timing of notice to the insurer,should be carefully evaluated as events develop. For businessessuffering losses and looking to navigate or obtain coverage for thecoronavirus, having experienced coverage counsel can beinvaluable.

Walter J.Andrews is a partner at Hunton Andrews Kurthin Miami. His practice focuses on complex insurance litigation,counseling and reinsurance arbitrations and expert witnesstestimony. He may be reached at [email protected].

Cary D.Steklof is an associate at the firm. Herepresents individual, corporate and municipal policyholders in alltypes of first- and third-party insurance coverage and bad faithdisputes. He may be reached at [email protected].

From: Daily Business Review