EPIC Risk Advisory Bulletin

Volume 1, Issue 21

In this issue, we take a focused look at:

  1. Supply Chain and Business Risks
    • FMCSA Extends Emergency Declaration
  2. Insurance Products and Coverage Information
    • Business Interruption Update
    • PPP Loans: What’s Next?
    • News of Note
  3. Human Resources and Employee Benefits
    • Contact Tracing: Considerations for Employers
    • Remote Workplace Investigations
    • Temporary Cal/OSHA Change: CA Mask Shortage
    • Benefit Program Renewals: Looking Ahead
    • Workers’ Compensation Webinar
    • Presumptive Compensability Legislation Update
  4. Insights from Across the Firm

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.


Supply Chain & Business Risks

FMCSA Extends Expanded Emergency Declaration

The Federal Motor Carrier Safety Association (FMCSA) has revised and extended the duration of its COVID-19 Emergency Declaration until September 14, 2020. The most recent declaration, and the new version linked below, includes a category for food, paper products and other groceries for emergency restocking of distribution centers or stores.

The extended and expanded emergency declaration continues to provide regulatory relief only to commercial motor vehicle operations providing direct assistance related to the pandemic. It is limited to transportation of:

  • Livestock and livestock feed
  • Medical supplies and equipment related to the testing, diagnosis and treatment of coronavirus
  • Supplies and equipment necessary for community safety, sanitation, and prevention of community transmission of coronavirus, such as masks, gloves, hand sanitizer, soap and disinfectants
  • Food, paper products and other groceries for emergency restocking of distribution centers or stores

Direct assistance does not include routine commercial deliveries, including mixed loads with a nominal quantity of qualifying emergency relief added to obtain the benefits of this emergency declaration.

For more details, reach out to the EPIC Transportation & Logistics team, including Michael Nischan in Risk Control: michael.nischan@epicbrokers.com


Insurance Products & Coverage

Business Interruption Update

After many cases where policyholders have been told their insurance does not cover coronavirus claims, a new ruling from a federal judge in Kansas City could mark the opening of a new chapter on this issue – at least for small businesses. For the first time, a judge (Bough) has held that coronavirus may constitute a direct physical loss, triggering insurance coverage for property damage.

The Kansas City plaintiffs, unlike plaintiffs in some of the previous cases, argued that the coronavirus – as a widespread, airborne virus that was rampant in the community – had likely infected their properties in a literal sense. It was the presence of the virus, they argued, that had rendered their businesses unsafe and unusable, forcing the shutdowns that triggered their insurance coverage.

An argument that has worked in favor of insurers for some time is that payout on all claims of this nature triggered by coronavirus would decimate the insurance industry and leave it insolvent. Thus far, however, U.S. insurers’ coronavirus costs are less than feared.

Judge Bough stated that discovery may provide evidence that changes his analysis, including facts about “the nature and extent of COVID-19 on (the plaintiffs’ premises).” The judge also suggested that he will pay attention to “subsequent case law in the COVID-19 context,” especially construing similar insurance provisions and facts. He emphasized that the ruling, issued on August 12, was a first step.

A ruling coming down the same day in Washington D.C. against restaurants in favor of insurance companies, may provide case law against Judge Bough’s ruling.

A long court battle likely lies ahead for policyholders seeking restitution for losses caused by the pandemic under their business interruption policies. A wise step for all Insureds is to review policy terms and language closely at renewal.

For more information on this issue, contact your EPIC broker.

Paycheck Protection Program – What’s Next?

The Paycheck Protection Program (PPP) provides a forgivable loan to small businesses as an incentive to keep workers on the payroll during the pandemic. The Small Business Administration (SBA) will forgive loan repayment provided that specific employee retention criteria are met and the funds are used for eligible expenses.

In these precarious times, retention and forgiveness of borrowed PPP funds is critically important to its recipients. Unfortunately, with a new program comes uncertain regulation. As such, while the SBA will likely approve most forgiveness applications upon initial receipt, they may later audit the file and reverse their decision. The timing on these decisions can fall within a six-year window.

If forgiveness is deemed to have been extended to an ineligible recipient, PPP loan proceeds may have to be returned, either partially or in whole, with added interest. If required funds are not returned, recipients may be required to pay fines or penalties.

An additional challenge for businesses may come in learning that their PPP loan forgiveness amounts will be reduced. In these cases, the SBA has reported that businesses that applied for and received both PPP loans and Economic Injury Disaster Loans (EIDL Advance Loans) will have the amount of their EIDL grants taken from the PPP loan forgiveness they would have received. If a small business received $5,000 in EIDL grants, for example, and a $200,000 PPP loan, they would only be eligible to have a maximum of $195,000 forgiven. Borrowers who received EIDL Advances greater than their PPP loans will not be eligible for any forgiveness of the PPP loans.

There is also a risk that a substantial PPP loan will be determined as unforgiveable. This situation is particularly precipitous for companies that received a PPP loan of $2 million or more and intend to keep the money without repayment. Loans under $2 million fall within a safe harbor, yet all others are subject to review.

An insurance solution has been developed for PPP loan recipients. The coverage responds to a successful challenge by the SBA or other government authority of a loan recipient’s eligibility made in the application process. It does not cover losses resulting from the recipient’s use of the loan or fraud.

A great deal of confusion continues to accompany the PPP loan forgiveness process. Learn more from a recent webinar on the PPP loan insurance solution: how to apply, available coverage and terms, the likely SBA forgiveness process, and risk considerations.

Contact Vanbridge team member Greylan Erlacher Mardy at gerlacher@vanbridge.com to learn more. For design and law firms, reach out to Greyling team member Kent Collier at kent.collier@epicbrokers.com.

News of Note

The passage of another two weeks has brought forth more developments across the insurance world. Here is a rundown of recent news stories of interest.


HR & Employee Benefits Insights

Contact Tracing: Considerations for Employers

As workers return to offices and production facilities across America, employers must create safe work environments and institute procedures that protect employees.

One important aspect for which employers must have a plan is contact tracing when employees become exposed to coronavirus. The upcoming flu season and ongoing lags in coronavirus test results, as well as differing state and local regulations on health screening procedures, hold the potential to complicate employers’ efforts.

Along with environmental controls and symptom screening, employers should get a thorough plan together now for contact tracing. The CDC has released guidance for employers in non-healthcare workplaces that can be followed concerning case investigation and contact tracing.

When an employee tests positive for coronavirus, it is critical to act quickly to identify and notify any other employees who may have been exposed to the virus. It generally falls to Human Resources to conduct a worksite investigation (see next story for more on this topic), which should be confidential and avoid alarming the entire workforce.

Immediate action is key to preventing further spread of the virus throughout a workplace. Such action is made easier with a thorough plan put in place ahead of an outbreak. The CDC has determined that exposure to coronavirus begins when a person is within six feet of an infected person for 15 minutes or longer. It recommends that employers send home any employees with a risk of exposure and maintain self-quarantine for 14 days or until a negative test result returns.

Helpful tips to follow when preparing a contact tracing plan include the following:

  • Create and share the policy with all employees notifying them that they will be asked to provide a list of work contacts if exposed.
  • Compile a list of questions and talking points to use in contact tracing interviews.
  • Prioritize confidentiality by not revealing the name of infected employees to anyone beyond those conducting the contact tracing.
  • Use a form to standardize the collection of information gathered.
  • Explore apps that may make the process more efficient.

Partner with state and local health departments to conduct contact tracing efforts most effectively. The Laborers Health and Safety Fund of North America has compiled a guide to help employers understand and execute contact tracing. Access Guide 

For more information or assistance, contact your EPIC team member.

Conducting Remote Workplace Investigations: Tips for HR Teams

Workplace investigations are, at times, necessary in the workplace. In the pandemic environment, investigators have fewer tools at their disposal if interviews must be held remotely. In-person cues such as eye contact, body language and physical closeness create rapport without losing control. Credibility can be more difficult to discern absent these physical markers.

Tips for conducting effective remote workplace investigations offered by the Society for Human Resource Management (SHRM) include the following items.

  • Engage interviewees through conversation upfront.
  • Focus on the goal (determining what happened relative to the issues being investigated) not the interview medium.
  • Consider creative alternatives to remote investigations, such as a coffee shop or other venue where appropriate social distancing can be maintained.
  • Leverage video conferencing technology over phone calls when possible.
  • Minimize distractions during interviews by selecting times when parties involved can participated in an uninterrupted manner.
  • Ask the same kind and amount of questions as you would during an in-person interview.
  • When sharing documents, use a screen sharing feature as opposed to email.

When conducted effectively, remote interviews may be more convenient and less time-consuming than in-person interviews. In order to be prepared, it may be helpful to follow best practices, plan ahead, be creative and remain flexible.

For more information or assistance, contact your EPIC team member.

Cal/OSHA Issues Temporary Change in Response to Mask Shortage

One of the nation’s most populous states is facing a possible shortage N95 masks, which are considered critical PPE for workers in healthcare settings. In light of the shortage, the California Department of Industrial Relations this month issued temporary changes to its guidance that health care workers be provided certified respirators.

The guidance applies to healthcare and other employers covered by Cal/OSHA’s Aerosol Transmissible Diseases Standard (title 8 section 5199) and discusses respirator requirements for covered employers who care for suspected or confirmed coronavirus patients when there are severe respirator shortages.

Its guidance replaces previous directives issued June 12, 2020, which also addressed respirator use during severe respirator supply shortages. While supply chains for obtaining respirators are not restored to full capacity, the supply of respirators for hospitals has improved enough that their prioritization is not currently necessary, according to Cal/OSHA.

Under the guidelines, Cal/OSHA is allowing employees to use reusable respirators certified by the National Institute for Occupational Safety and Health (NIOSH). In addition, employees may wear their own respirators if they comply with Cal/OSHA requirements, among other nuances.

The guidelines are subject to change. The notice stressed that employers comply with all other provisions of section 5199 at all times, which includes engineering controls to minimize employees exposed to coronavirus, using barrier enclosures, and more.

Employers should continue to monitor all announcements from OSHA and Cal/OSHA regularly.

For more information or assistance, reach out to your EPIC team member.

Planning for Benefit Program Renewals

Communicating important information about open enrollment periods with employees is always critical and sometimes challenging. Those challenges have only increased in the remote environment many companies are now in due to the coronavirus pandemic.

Deadlines for providing required ERISA benefit plan notices and other disclosures to plan participants have been temporarily extended under federal relief. The relief applies where a plan sponsor acts in good faith and furnishes the material as soon as administratively practicable.

Employers may use electronic alternative means of communication to distribute plan information to employees. These means may include email, text, and continuous access websites. This measure is a temporary relaxation of the Department of Labor’s standard electronic disclosure rules.

Communicating benefit plan information in an engaging, compelling manner will help employees fully understand the valuable investment employers make in them through the benefits offered.

Open Enrollment Tools and Tips

  1. EPIC Open Enrollment Checklist 
  2. How to Host Effective Open Enrollment Presentations 
  3. Answers to Frequently Asked Renewal Questions  

For more assistance with your open enrollment or employee benefits questions, contact your EPIC team member.

Workers’ Compensation Webinar

EPIC and law firm Fisher Phillips partnered to deliver an engaging webinar recently as part of a Workers’ Compensation webinar series EPIC is producing for clients. Topics covered in the hour-long webinar include:

  • Workers’ Compensation presumptions from CA governor and coronavirus-related safe workplace requirements
  • Latest developments from CA governor’s office on remote work requirements and potential shutdowns or furloughs
  • Leaves of absence, including when and how employers must provide sick leave or other statutory leaves of absence for employees effected by coronavirus
  • Protecting company trade secrets and confidential information with remote workforce
  • Potential employer’s third-party liability

Play Webinar

Presumptive Compensability Legislation Update

An ongoing issue affecting Workers’ Compensation coverage is presumptive compensability legislation at a state-level. At least 18 states have proposed Workers’ Compensation bills related to coronavirus, including an expansion of coverage for either frontline, essential or all workers. Some states have issued executive orders, bulletins, emergency rules and directives on Workers’ Compensation coverage for certain workers. It is a dynamic situation that warrants monitoring by employers.

The latest development came in mid-August when the Judicial Panel on Multidistrict Litigation (JPML) denied two motions to consolidate hundreds of suits, including dozens of class action suits by policyholders whose insurers have denied their claims. The ruling means there will not be a nationwide, multi-insurer proceeding to determine whether businesses that closed in response to coronavirus are entitled to claim payouts through business insurance coverage.

The JPML judges cited variations in policy language as grounds for their decision. The panel will consider creating four smaller Multidistrict Litigations (MDLs) against four insurance groups, but for now, the likely outcome is continued variation in rulings in individual suits by policyholders.

A ruling by a federal judge in Kansas City (noted earlier) that a group of restaurant owners’ losses due to coronavirus may be covered under their business interruption insurance is an example of the types of decisions that could come in the weeks and months ahead. In that case, the judge ruled that claims were payable because the virus was in their establishments and therefore constituted closure due to physical damage. In Texas, a federal court ruled that pandemic-related lockdowns did not constitute a direct physical loss for a group of barbershops there.

An excellent resource for staying current on legislative activity is the National Council on Compensation Insurance (NCCI) site. NCCI is tracking state compensability presumption legislation and updates state statuses weekly. Its coronavirus Workers’ Compensation compensability presumptions chart is updated weekly with developments related to state legislative activity in this area. Access chart

Ogletree Deakins has assembled a searchable table to track which states have implemented or proposed amendments to state Workers’ Compensation statutes. The table also addresses Workers’ Compensation benefits for health care workers and first responders. Access table

For more information, contact your EPIC team member.


Insights From Across the Firm

EPIC thought leaders have written numerous articles on matters relating to coronavirus, all of which are available on EPIC’s website. Those most recent articles and events include:

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. 

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