Covering Coronavirus: Risk Considerations

EPIC Risk Advisory Bulletin

Volume 1, Issue 28

In this issue, we take a focused look at:

1. Supply Chain and Business Risks
   • Calculating the Economic Impact of Coronavirus Closure Orders
   • Future of Business Travel and Commuting
   • FMCSA Extends and Expands Emergency Declaration
2. Insurance Products and Coverage Information
   • Entertainment Insurance Market Update
   • Builders Risk Marketplace Update
   • Possible Migration to Exchanges for Healthcare
   • Business Interruption Update – PRIA and More Litigation
   • Presumptive Compensability Update
   • News of Note
3. Human Resources and Employee Benefits
   • OSHA Issues More Fines
   • Cal OSHA Adopts Emergency Temporary Standard for Coronavirus
   • CDC Revises Quarantine Recommendations
   • CDC Guidelines for Celebrating the Holidays Safely
   • Improved Air Quality a Key to Beating Coronavirus
   • 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

Calculating the Economic Impact of Coronavirus Closure Orders

The lack of a national framework for a coronavirus response has resulted in states and localities taking various measures to try to slow the spread of coronavirus in their communities.

Closures vary from one state to another, with some measures being more severe, such as a limited stay at home order in California, to less restrictive measures in places like Indiana. In some places, such as in Loveland, Colorado, businesses are banding together to resist closure orders. In New York, small business owners of facilities like gyms, which have been shut down there, are expressing frustration and fear over lost earnings from the targeted closure of establishments like theirs.

With COVID relief from the CARES Act set to run out at the end of the year, the situation is getting dire for many businesses. Guitar Center, the largest retailer for musical instruments in America, filed for bankruptcy on November 11. Unfortunately, they are not alone, as small and large businesses are being forced to permanently shut their doors.

Millions of unemployed Americans will lose unemployment benefits while tenants may be evicted from their apartments. And soon, student loan payments will resume. All of these events and more will have an impact on businesses. In a USA Today article, Bank of America economists have said in a research note that without additional funding approved by Congress, the economy, and “will be operating without a safety net in January.”

The director of economic policy at the Bipartisan Policy Center concurred, saying in a recent article on The Hill, “It’s a lot of risk to be putting on the economy at a time when so many other pressures are already underway.”

Jobs Most at Risk in 2020 Because of the Pandemic

Glassdoor released a report outlining three effects on the labor market from the coronavirus pandemic:

1. Jobs that won’t return until the pandemic is under control
2. Jobs that may take years to return to pre-pandemic levels
3. Jobs that may never return

Jobs in the third category include those in the personal services industry such as beauty consultants and stylists, as well as discretionary health care positions like audiologists who assist with hearing aid placement, optometrists and physical therapists. Jobs that may take years to return include positions in food service and education.

Prior to the pandemic, the U.S. economy was doing well, by a number of measures; unemployment was at a 50-year low; inflation was below 2.0 percent. As the country shut down in the spring; however, GDP growth fell during the second quarter by 31.4 percent – a drop not seen since the Great Depression. Unemployment spiked to 14.7 percent at one point and consumer spending remains depressed.

Long term depression of commercial real estate and wage growth could lie ahead as employers shift to remote workforce environments and more workers compete for fewer jobs. Calculating the precise impact of the pandemic may not be possible until its end, but one thing is clear – for many, work and life have changed.

The Future of Business Travel and Commuting

While air travel is expected to be up over the holiday season, business travel remains down and may never return to pre-pandemic levels. The Sunday after Thanksgiving was the busiest travel day since the pandemic began, and while that may help beleaguered airlines, business travel is far more lucrative and less likely to resume pre-2020 levels, even after a coronavirus vaccine is widely available.

A large part of the reason for that change is that working professionals have learned to perform their work satisfactorily without travel for nearly a year. A re-imagining of work by many large corporations may translate into less travel going forward. Microsoft founder Bill Gates said recently that he believes business travel will shrink by 50 percent and office work will be reduced by a third after the pandemic subsides. Gates believes companies will have an extremely high threshold for the type of business travel where flying to sit in front of someone else is required. Indeed, some companies, like Twitter, have said their employees may work remotely forever, from anywhere.

Public transit is down, largely because many workers can now perform their jobs comfortably from home. Even once a vaccine eliminates the health and safety concerns that come with coronavirus, many workers may feel unfavorably about returning to the office because of the commute it requires. Significant drops in ridership have created financial stress for transit agencies. Some are trying to bring travelers back with targeted incentives.

The Massachusetts Bay Transportation Authority (MBTA) is offering free face masks at several highly trafficked subway stations and trolley stops to encourage riders to resume their use of public transportation systems. Chicago recently announced the addition of coronavirus testing facilities at both O’Hare International and Midway Airports. The city is hopeful that the presence of easily accessible testing locations will encourage the resumption of both leisure and business travel though its airports.

Navigating the dynamic business landscape in a post-coronavirus era will require patience, flexibility and a willingness to both embrace new technologies, as well as knowing when older customs, such as a face to face meeting, are required.

FMCSA Extends and Expands Emergency Declaration

The Department of Transportation (DOT) announced on December 1 that all necessary regulatory measures have been taken for the safe, rapid transportation of a coronavirus vaccine by both land and air.

With the unprecedented pace of vaccine development through Operation Warp Speed, the DOT has made preparations to enable the immediate mass shipment of a coronavirus vaccine. The DOT has spent time coordinating with private sector companies to carry vaccine doses from manufacturing facilities to distribution centers and inoculation points. It says it has also established appropriate safety requirements for all potential hazards involved in shipping the vaccine, including standards for dry ice and lithium batteries.

The DOT has continued to support critical supply chain networks by granting a nationwide exemption to HOS regulations for motor carriers and commercial drivers providing direct emergency assistance. As a result, the FMCSA has extended and expanded the Emergency Declaration until February 28, 2021. The emergency declaration continues to provide regulatory relief only to commercial motor vehicle operations providing direct assistance related to coronavirus and is limited to transportation of:

• Livestock and livestock feed
• Medical supplies and equipment related to the testing, diagnosis and treatment of coronavirus
• Vaccines, constituent products, and medical supplies and equipment including ancillary supplies/kits for the administration of vaccines, related to the prevention of coronavirus infection
• 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

Routine commercial deliveries do not qualify for this emergency declaration exemption; nor do mixed loads containing a nominal quantity of qualifying emergency relief.

For more information, contact an EPIC transportation and logistics team member.

Insurance Products & Coverage

Entertainment and Live Event Insurance Market Update

The entertainment and live event market continues to exclude all things related to virus, bacteria, and communicable diseases. Prior to the coronavirus pandemic, entertainment markets did not exclude these perils on specialty programs and in many cases, did not have exclusions on the General Liability or Property policies.

The entertainment markets are pushing for new exclusionary wording in each of the main entertainment markets (states). When writing new risks in a state where a market has not been granted permission to use their exclusion, the Insurer will decline to write the risk entirely. In New York, entertainment Insurers are willing to use the New York Free Trade Zone (NYFTZ) to write the risk, because they can add their exclusions. Two key markets that serve the industry have taken the lion’s share of the losses and have caused these Insurers to pull out of certain markets. Allianz has pulled out of Canada and Chubb is closing all of its international entertainment offices.

TV production activity has restarted and the cost to produce these projects has increased up to 35% to satisfy all the union and guild requirements in terms of testing, cleaning and general coronavirus-related safety. The feature film business has not rebounded because investors are not interested in having a large gap in coverage that cannot be protected by production insurance and completion bonds. Clients indicate that touring, theater and events may not return until summer of 2021 or later.

A broader update on the entertainment and live event markets will be provided in EPIC’s January 2021 market report. For more information, contact an EPIC broker.

Builders Risk Marketplace Update

The impact of the pandemic on the Construction marketplace has been difficult to discern. This is largely due to the unique nature of construction projects – no two are exactly alike. Product-driven updates are rare and market adjustments are generally driven by construction type, with higher type numbers receiving higher rates. However, the wildfires on the west coast have created a worldwide shortage of capacity for wood-frame construction projects. This is particularly pronounced in wildfire-prone areas including Arizona, California and Texas.

While a capacity issue has existed for years, it has never been as acute as it is currently. Builders risk policy extensions are currently not able to be completed, pushing them into lender-forced placements. When extensions are approved, they generally include 150 percent of the original premium for an additional 60-day term.

Additional problematic issues include marina and port-based risk as well as projects in high-density urban areas. These are considered higher risk due to the increased potential for social unrest and protests.

Structures built with highly-rated fire protection materials, such as Type I or Type II office projects, have received relatively positive interest and capacity from the marketplace without any substantive increase in rates, year-over-year.

Overall, a construction project rate is determined by its particular features, including location, construction type, soil conditions, whether or not there is a need for CAT coverage (e.g., CA EQ, high hazard flood, coastal wind), and the level of site protection (e.g., 24-hour monitoring, manned security, lighting, fencing).

Contact an EPIC broker for more information.

Will Coronavirus Cause a Migration to Exchanges for Healthcare?

Healthcare insurance trends caused by the ongoing coronavirus pandemic are beginning to emerge. In Massachusetts, the pandemic is creating a 10 percent shift to MassHealth as workers’ primary health insurance option. A monthly report there found that overall insurance coverage numbers remained stable in the six months after the governor declared a state of emergency around the pandemic, though membership shifted between private insurance, MassHealth and Medicare plans. Enrollment in private insurance dropped by 2.1 percent from March to September, and declines were concentrated among employer-sponsored insurance.

Nationwide, some employers are letting employees shop for insurance instead of offering one or more options. A federal rule change last year allowing employers to reimburse workers for coverage bought without paying a tax penalty may be driving the change. Instead of signing up for coverage through their employer, employees search for plans on the individual insurance markets, where they can, presumably, find more options. Employees are then reimbursed by employers for the cost of their coverage.

While the move may help insulate employers from annual cost spikes, it is a change for workers used to selecting benefits from only the choices offered by their employers. The new approach, which is known as Individual Coverage Health Reimbursement Arrangement (ICHRA), began with coverage plans for this year. More workers may see ICHRAs offered during their open enrollment period for 2021 coverage. However, since ICHRAs were made possible through an executive order issued by President Trump, it is possible that they could be repealed through an executive order issued by President Elect Joe Biden sometime during his administration.

In a year where many businesses, particularly smaller ones, are struggling to keep the lights on and doors open, the ICHRA option may provide a suitable alternative to not offering insurance altogether.

Contact an EPIC broker for more information.

Business Interruption Update – PRIA and More Litigation

Progress toward the creation of a federal backstop for business interruption claims derived from future pandemics continues. In late November, the House Financial Services Committee held a hearing on H.R. 7011, the Pandemic Risk Insurance Act (PRIA). If passed, the Act would create a system of shared public and private compensation for business interruption losses, which would protect businesses from future pandemics and public health emergencies.

Rep. Maloney stated in a release that, “the PRIA will provide a framework for small businesses to get the relief they need, without having to wait for Congress to pass another emergency bill.”

The legislation is based on the post-9/11 Terrorism Risk Insurance Act and seeks to create a Pandemic Risk Reinsurance Program to provide compensation for future losses, but has been opposed by some industry organizations, which oppose any legislation that would require insurance organizations to bear the risk of business-interruption losses from pandemics.

Such opposition was evident during the November 19^th hearing, where witnesses representing the insurance industry testified that global pandemics fall into the category of uninsurable risks and that business continuity losses resulting from a pandemic could bankrupt the industry. For its part, the PRIA would reimburse insurers when claims related to a pandemic or epidemic exceed $250 million nationwide. Covered businesses would have to demonstrate they suffered significant business interruption and experienced a sharp decline in revenue.

On the litigation front, battles continue to be fought between insurers and businesses in courts around the world, with policyholders seeking payout of business interruption claims caused by the coronavirus pandemic. In South Africa, the high court ruled against the country’s largest short-term insurer, Santam, in a case brought by Ma-Afrika Hotels, Stellenbosch Kitchens and Insurance Claims Africa – a public loss adjustment company. The court ordered Santam to pay for losses over the 18-month policy period as well as legal fees. Interestingly, the judgment cited similar cases in the UK and U.S.

Suits continue across America, with the recent addition of a suit brought against insurers casino for $10 million in business losses caused by a 65-day coronavirus-related shutdown during the spring. The suit alleges breach of contract and negligence against the insurer.

Plaintiffs may gain a favorable judgment in court if they are able to show two things. First, that the virus was physically present on a covered property; and second, that the virus posed an imminent threat to the public.

For more information, contact an EPIC broker.

Presumptive Compensability Legislation

An ongoing issue affecting workers’ compensation is presumptive compensability legislation from states. Many 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.

Eight months into the pandemic, an interesting trend has emerged – in much of the country, the volume of coronavirus workers compensation claims accepted, even by states with presumption laws in place, has been lower and less costly than anticipated. This appears to be the case in California, where according to the California Workers Compensation Institute, the state saw nearly 54,000 coronavirus claims between March and October. Nearly 30 percent of those claims were denied, with the rest accepted or pending. Clearly defined workplace policies and safety practices appear to provide an adequate defense for employers, even those in states with rebuttable presumption.

The situation remains dynamic and warrants continued monitoring by employers. Ogletree Deakins has assembled a searchable table to track the states that have implemented or proposed amendments to state workers’ compensation statutes. The table also addresses workers’ compensation benefits for health care workers and first responders.

For more information, contact an EPIC team member.

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.

• U.S. regulator fines The Cheesecake Factory for misleading COVID-19 impact disclosures, Reuters, Dec. 4
• COVID-19 puts insurance on the all-inclusive menu, Business Insurance, Dec. 1
• Two insurance companies fined for violating coronavirus emergency orders, KATU2, Dec. 1
• Georgia joins other jurisdictions where COVID-19 business income claims fail, Law dot com, Dec. 1
• The COVID-19 pandemic complicates film insurance coverage and threatens independent filmmakers, Forbes, Nov. 30
• Panel to weight new MDLs for COVID-related insurance cases, Reuters, Nov. 30

HR & Employee Benefits Insights

OSHA Issues Another $300,000 in Coronavirus Fines

During November, the U.S. Occupational Safety and Health Administration (OSHA) issued another $300,000 in fines for coronavirus-related safety violations, bringing the total levied since the pandemic began to more than $3.3 million.

Of the more than 244 citations that have been issued thus far, the most common failures include:

• Not implementing a written respiratory protection program
• Failing to provide a medical evaluation, respirator fit test, training on the proper use of a respirator and personal protective equipment
• Neglecting to report an injury, illness or fatality
• Not recording an injury or illness on OSHA recordkeeping forms
• Lack of compliance with the General Duty Clause of the Occupational Safety and Health Act of 1970

OSHA also reported that it has removed more than 600,000 workers from coronavirus hazards during the ongoing pandemic.

Citations from OSHA’s coronavirus-related inspections can be searched for and accessed on the Department of Labor’s website.

A full list of the standards cited for each business, and the inspection number, can be found on OSHA’s website.

Contact an EPIC team member for more information.

Cal OSHA Adopts Emergency Temporary Standard for Coronavirus

The California Occupational Safety and Health (Cal OSHA) standards board unanimously adopted an emergency standard regarding coronavirus workplace prevention. These standards protect workers from hazards related to coronavirus and are now in effect until at least the end of May. The standards, which apply to most workers in California not covered by Cal/OSHA’s Aerosol Transmissible Diseases Standard, may extend the period and could also possibly make the new rules permanent.

The new rule mandates the following for employers:

• Masks – employers must provide face coverings and ensure employees wear them over the nose and mouth while indoors, or while outdoors and less than six feet away from another person.
• Time off – employers must provide paid time off to employees who must be excluded from the workplace because they fall within the definitions of “COVID-19” cases or employees with “COVID-19 exposure.” COVID-19 cases are defined as a person who has a positive COVID-19 test; is subject to a COVID-19-related order to isolate issued by a local or state health office; or who has died due to the virus. The final rule appears to require paid time off each time an employee meets workplace exclusion criteria.
• Exclusion from workplace – employers must exclude employees with coronavirus exposure from the workplace for 14 days after the last known exposure to a COVID-19 case. The emergency standard defines COVID-19 exposure as “being within six feet of a COVID-19 case for a cumulative total of 15 minutes or greater in any 24-hour period within or overlapping with the ‘high-risk exposure’ period.”
• Exceptions – employers are not required to exclude employees who have not been excluded or isolated by the local health department if they are temporarily reassigned to work where they do not have contact with other persons until the return to work requirements are met.
• Continuation of benefits – employers must continue and maintain an employee’s earnings, seniority, and all other employee right and benefits, including the employee’s right to their former job status, as if the employee had not been removed from their job.
• Written Prevention Program – employers must prepare a written COVID-19 Prevention Program notifying employees and third parties of potential COVID-19 exposure in certain situations. They must also provide a system for communicating information to employees about COVID-19 prevention procedures, testing, symptoms and illnesses, including a system for employees to report exposures without fear of retaliation.

More detail is included in the rule and should be carefully reviewed by all California employers. Ogletree has provided FAQs about the new standard

Ogletree has also prepared an article with more explanation about the various aspects of the rule.

Resources for California Employers

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic, including the Cal/OSHA guidance regarding the new regulations, and will post updates on the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available.

Additionally, Ogletree has prepared a webinar titled, “California’s New COVID-19 Safety Regulations: What Employers Need to do to Prepare.” That webinar is available online

An online listing of local information and alerts may help employers implement COVID-19 prevention programs.

Cal OSHA has released a Model Written COVID-19 Prevention Program document, which employers may use to create one specific to their workplace. It is available by clicking the link Model Written COVID-19 Prevention Program on their website.

Contact an EPIC team member for more information.

CDC Revision of Quarantine Recommendations Could Impact Employer Policies

On December 2, the Centers for Disease Control and Prevention (CDC) announced that it is revising its coronavirus quarantine guidelines. The agency has recommended a 14-day quarantine period for individuals who come into close contact with positive or presumed-positive individuals. While that recommendation remains the best option after close contact with a presumed positive individual, the CDC now offers alternative quarantine periods for individuals who remain symptom-free throughout them. Those periods are:

• 10-days following close contact
• 7 days following close contact with a negative test taken within 48 hours of the final day of quarantine (i.e., at least 5 days following close contact)

For both the 10-day and 7-day alternative quarantine periods, the CDC recommends daily symptom monitoring and mitigation strategies including: correct and consistent mask usage; social distancing; hand and cough hygiene; environmental cleaning; indoor ventilation; and avoidance of crowds. The CDC also indicates the 7-day alternative should be available only when the use of tests to discontinue a quarantine will not have an impact on community diagnostic testing. Testing for infection evaluation should be the priority.

In light of the revised CDC guidance, employers may wish to reassess their close contact quarantine policies, including whether to continue requiring employees to remain home for 14 days after close contact or to revise policies to reflect either or both the 10-day and 7-day quarantine periods following close contact. Given the CDC’s continued emphasis that a 14-day quarantine period is best, employers may decide to leave that quarantine time period in place. Other employers needing or desiring more operational and staffing flexibility may choose to use the 10-day or 7-day quarantine periods, taking into account the availability of testing for end-of-quarantine purposes in their communities.

CDC Releases Guidelines for Celebrating the Holidays Safely

During the last week of November, more than 1 million coronavirus cases were reported in the United States. In light of those figures, the CDC is urging Americans to stay home over the upcoming holiday season and to consider getting tested for coronavirus both before and after traveling if they decide to go elsewhere for the holidays. During a news briefing, health officials said testing should ideally occur one to three days before travel and again three to five days afterward. They also recommended reducing non-essential activities for a week after returning home. Travelers opting not to get tested for coronavirus after their trip are encouraged to cease non-essential activities for ten days.

The CDC offers considerations on its site to slow the spread of coronavirus during small gatherings. These considerations are meant to supplement —not replace— any state, local, territorial, or tribal health and safety laws, rules, and regulations with which all gatherings must comply.

Due to the ever-changing coronavirus legal environment, consultation with counsel is recommended, as is seeking updates from the CDC, OSHA, DOL, DHS and other state/local agencies on a regular basis.

It remains important to routinely monitor state “Closure/Reopening Orders” and “Orders and Guidance to Screen Employees for COVID-19 and to Provide Protective Measures.” Links to those documents are below:

• COVID-19 Closure and Reopening Orders – States and Major Municipalities (Updated Nov. 23)
• Orders and Guidance to Screen Employees for COVID-19 and to Provide Protective Measures (Updated Nov. 24)
• Orders and Other Authority or Guidance to Provide Workers’ Compensation (WC) Coverage for COVID-19 (Updated Nov. 23)

Recognizing that conditions will continue to evolve and change, we encourage you to reach out to your EPIC service team members with specific concerns and questions as to whether coverage may or may not respond. Analyzing whether or not existing insurance policies provide coverage for losses is a critical early step. Business interruption, commercial general liability, medical malpractice, property, workers’ compensation, D&O and E&O policies all may potentially provide coverage and should be examined within the context of coronavirus.

Improved Air Quality A Key to Beating Coronavirus

Eight months into the coronavirus pandemic, people are familiar with the need to wear masks to slow the spread and transmission of the virus. Fewer know about the importance of proper ventilation to reduce its spread. Because the virus is spread through droplets that are expelled when infected people speak, sing and cough. Those droplets remain in the air and are transmitted when other people breathe them in.

One way to mitigate the spread of the droplets is by increasing the amount of outside air brought into indoor spaces. Increasing the air exchange rate, or the amount of times per hour that fresh air circulates through an indoor space, to three to six exchanges per hour may be helpful in reducing the amount of coronavirus droplets in the air. When HEPA filters are added into a building’s HVAC system, the combination can be helpful in combating coronavirus.

HEPA filters remove 99.97 percent of airborne particles, including those carrying viruses, like the coronavirus. These are the same kind of filters used in office settings and airplanes. Their ability to trap particles in the air as air is passed through them makes HEPA filters and a higher exchange rate effective tools in helping employers slow the spread of the coronavirus and provide a safer work environment.

For more on this topic, view this free video from the Wall Street Journal

Contact an EPIC broker for more information.

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. The most recent articles include:

• Vaccine Costs Aren’t Likely to Break the Banks of Corporate Health Plan Sponsors, December 3
• Will Amazon Pharmacy Change Healthcare?, December 1
• Pharmacy Update, November 30
• BCBS Antitrust Settlement Could be a Game Changer, November 23
• The Hardening Stop Loss Market, November 19

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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