Covering Coronavirus: Risk Considerations

EPIC Risk Advisory Bulletin

Volume 2, Issue 1

In this issue, we take a focused look at:

1. Special Introduction: A Look Back at the Pandemic
2. Supply Chain and Business Risks
   • FMCSA Extends CDL Waiver Period Through February
   • New Coronavirus Aid Bill Highlights
   • SolarWinds Hack Reveals Need to Review Cyber Cover
3. Insurance Products and Coverage Information
   • State of Entertainment Industry
   • Business Interruption Update
   • Presumptive Compensability Update
   • News of Note
4. Human Resources and Employee Benefits
   • Webinar: Cal-OSHA Coronavirus Preparation Program
   • What Will Work Look Like in 2021?
   • How Vaccine Rollout Could Impact the U.S. Workforce
   • 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.

Introduction: A Look Back at the Pandemic

The passage of the New Year was perhaps more welcome this year than at any other in recent memory. Looking back, it is clear that the world has responded with amazing cooperation, ingenuity and diligence in fighting the pandemic.

The global scientific community came together to create vaccines in record time, and while the pandemic has certainly not been without challenge and heartbreak, it has also revealed innovation and grit as well as kindness and compassion, and put on display the heroics of front-line healthcare workers. Last year will be remembered by a generation; grandchildren not yet born will hear of how it changed work and life in a myriad of ways both small and great.

In the insurance industry, supply chain and business risks including the need to adapt business continuity plans for the emerging pandemic initially gripped businesses in every industry. Immediately, questions arose as to what constituted a communicable disease, as defined by specific policies, and whether or not coronavirus would be covered.

As the summer waned and riots raged, a legal battle emerged over whether or not commercial property and business interruption policies would cover claims related to damage caused during the riots, or economic loss caused by government shutdown orders related to the coronavirus. It has become clear that policy language is critical. Both in the U.S. and UK, legal debate has centered on whether or not coronavirus constitutes direct physical loss under a property policy. Judges have ruled on either side of the issue, with business owners arguing it does constitute physical loss and insurers stating it does not.

A strong argument made by insurers has been that if all policies paid out on claims for the virus, the industry would become insolvent. Calls for a federal backstop similar to the Terrorism Risk and Insurance Act (TRIA), passed in the wake of the September 11 Terrorist Attacks, led to action by legislators to propose the Pandemic Risk Insurance Act (PRIA) in May. As of December, no legislation has been passed, despite having the backing of the National Association of Professional Insurance Agents (NAPI), the Council of Insurance Agents and Brokers (CIAB) and the American Property Casualty Insurance Association (APCIA).

Presumptive compensability and liability immunity for businesses are other issues that took center stage throughout 2020. Many states passed presumptive compensability laws, including in California, making coronavirus infection coverable from a workers’ compensation perspective. Meanwhile, Republicans in Congress have sought to broker liability immunity for businesses at risk of being sued by workers who contract the virus. At the end of the year, no legislation had been passed regarding immunity at the federal level and workers’ compensation claims remained low throughout the nation.

Other lines affected by the pandemic include cyber insurance, which became even more critical as dangerous and costly cyber attacks increased against businesses. Both cyber rates as well as D&O premiums could rise this year due to the aforementioned heightened cyber crime activity. This also includes a rise in high profile lawsuits arising out of firms’ alleged mishandling of their response to the coronavirus and associated communication.

Protecting workers and providing proper PPE and physical distancing measures remains critical for employers, who have seen increased fines from OSHA for violations of safety practices related to the virus. Of additional concern is the need for employers to effectively manage benefits, productivity and workplace safety for employees who will continue to work remotely or in hybrid settings well into 2021.

Scientists and public health leaders, as well as regulators and insurers, are still learning about the novel coronavirus and much ground must still be made up in contact tracing, testing, vaccination, and ongoing daily practices to keep employees and consumers safe. However, the New Year has a brightness to it that seemed impossible a mere nine months ago. With surges anticipated and grim weeks ahead, that hope and optimism cannot be realized soon enough.

Supply Chain & Business Risks

FMCSA Extends CDL Waiver Period Through February

The Federal Motor Carrier Safety Administration (FMCSA) has extended its waiver to provide flexibility for drivers with expiring commercial driver’s licenses (CDLs) and commercial learner’s permits (CLPs). It is effective January 1, 2021 and expires on February 28, 2021 or upon the revocation of the President’s Declaration of National Emergency. The following provisions from previous waivers are also extended.

• CLP holders do not have to wait 14 days to take the CDL skills test.
• CDL/CLP holders and non-CDL drivers may maintain the medical certification status of “certified” without having a medical examination and certification as long as they maintain proof of valid medical certification and any required medical variance that was issued for a period of 90 days or longer and that expired on or after September 1, 2020.
• As long as the above condition is met, State Driver Licensing Agencies (SDLAs) will not change the CDL or CLP holder’s medical certification status to “not certified,” nor will they initiate a CDL or CLP downgrade.

The FMCSA continues to recognize the validity of commercial driver’s licenses issued by Canadian Provinces and Territories and Licencias Federales de Conductor issued by the United Mexican States, in accordance with 49 CFR part 383. This regulation recognizes a similar notice or declaration issued by those jurisdictions and extends the validity date of the medical examination and certification, and/or validity, of the corresponding commercial driver’s license due to interruption to government service resulting from coronavirus.

Additionally, the FMCSA has again waived the requirement that a CLP holder be accompanied by a CDL holder, with the proper CDL class and endorsements, seated in the front seat of the vehicle while the CLP holder operates a CMV on public roads or highways.

Under this waiver, a CLP holder may operate a CMV on public roads or highways without an accompanying CDL holder present in the front seat of the vehicle, provided that the CDL holder is elsewhere in the cab. The CLP holder must be in possession of evidence from the testing jurisdiction, including an authorized third-party tester, stating that the CLP holder has passed the CDL driving skills test. In addition, the CLP holder must have a valid non-CDL driver’s license, CLP, and medical certificate, unless the FMCSA waiver applies.

The FMCSA has waived the restriction that limits a state to administering a driving skills test to an out of state CDL applicant who has taken driver training in that state. Under this waiver, a state may elect to administer a driving skills test to any out of state CDL applicant, regardless of where the applicant received driver training.

The FMCSA has compiled a list of responses to frequently asked questions regarding actions SDLAs or CDL holders may take during the pandemic. They do not have the force and effect of law, but offer clarity regarding existing requirements under the law.

Access the responses online 

Contact an EPIC transportation and logistics team member for more information.

PPP Loan, Medical Billing Provisions in New Coronavirus Aid Bill

A sweeping pandemic aid bill was passed by Congress and signed by the President, making it possible for economic relief to be delivered to millions of Americans. Included within the $900 billion stimulus package are $600 direct payments for qualifying Americans and extended supplemental unemployment benefits of $300 per week for 11 weeks, as well as a number of other provisions. Unemployment aid is now also available to contract workers, such as delivery app drivers for services like Uber and DoorDash.

Though the aid package is half the amount of the $2.2 trillion CARES Act passed in March, it remains one of the largest relief packages given to Americans in the modern era. In addition to providing direct aid to Americans, the bill allots $285 million for new Paycheck Protection Program (PPP) loans. The restart of the PPP could help struggling small businesses gain much needed assistance to resume operations. Hotels and food-service businesses are expected to be eligible for larger loans, including amounts up to 3.5 times their average monthly payroll. Other borrowers would be eligible to receive up to 2.5 times their payroll. Publicly traded companies are not expected to be eligible for new loans.

Eligible expenses for loaned funds will be expanded beyond rent, payroll and utilities to include supplies, PPE for employees, and property maintenance/repairs caused by public disturbances, such as protests and riots. Another major change potentially impacting affected businesses is the ability for those that received PPP loans earlier in 2020 to apply again. Requirements will be stricter; this time around, loan recipients will need to have fewer than 300 employees and have experienced a 25 percent decrease in sales from a year earlier in at least one quarter.

Another less publicized provision of the new aid bill is a ban on surprise medical bills. Along with provisions for health care needs like $29 billion for vaccine purchasing and distribution, and another $22 billion for testing and contact tracing, the legislation includes language designed to protect patients from receiving surprise medical invoices for treatment. Specifically, out-of-network providers and air ambulance providers will be prohibited from billing patients for more than they would be charged by in-network providers.

Health plans may not require patients to pay extra for care unknowingly provided by out-of-network providers. The provisions do not apply if patients are notified by providers of estimated out-of-network costs at least 72 hours prior to care, and accept such charges. Also, while the bill requires insurers to pay providers upfront for applicable out-of-network care costs, it does not require the federal government to set payment benchmarks. Rather, providers and insurers will have a 30-day period to negotiate payments and settle disputes. Unresolved issues after that period would be settled during an Independent Dispute Resolution arbitration process administered by independent entities. The bill also includes language banning “gag clauses,” which prevent enrollees, plan sponsors and referring providers from gaining visibility into provider cost and quality data.

The provisions were applauded by the American Hospital Association. At 5,600 pages long, the bill contains many more provisions, which will be fleshed out in the days and weeks ahead.

For more information about how the bill may potentially impact your business, contact an EPIC broker.

SolarWinds Hack Reveals Need to Review Cyber Cover

On December 13, 2020, the press reported that cyber criminals hacked and inserted malware into a network monitoring software tool made by SolarWinds. The event created a cascading string of victims ranging from the U.S. Departments of State, Homeland Security, Commerce and the Treasury, as well as businesses receiving SolarWinds’ Orion network management software updates.

As cybersecurity experts work to understand the scope of the damage caused by the breach, affected businesses will continue to manifest in the months ahead. The incident highlights the importance of being well prepared and protected in this tech-dependent world. Ironically, keeping physical copies of the declaration page of cyber policies is one of the most critical steps to be taken.

Most cyber insurance policies offer comprehensive protection for organizations against the exact risks presented by the incident involving SolarWinds. Still, it is important to review cyber and other policies to determine whether this will be the case for your business or organization in this particular incident and others.

EPIC’s cyber team has developed a straight-forward Cyber Crisis Guide that captures important reporting information and provides guidance on the necessary steps to take in the event of any cyber incident, including SolarWinds. The guide addresses both unpatched corporate software and outdated security techniques, as well as emerging risks in mobile and IoT platforms that could put businesses at risk.

Contact an EPIC broker for more information or to access the guide.

Insurance Products & Coverage

The State of the Entertainment Industry

The entertainment industry, which has been hard hit by the coronavirus pandemic, got a shot in the arm with a new aid package that includes $15 billion for performance venues, independent movie theaters and other cultural institutions devastated by shut down orders and other restrictions enacted because of the virus. Nonprofit organizations, local newspapers, and radio and TV broadcasters will qualify for new loans under the revival of the Paycheck Protection Program (PPP).

The aid will help the industry, which is reeling from coronavirus infections erupting on the sets of movie and TV productions, despite stringent restrictions put in place to prevent them from occurring. Production has been declared essential in California, allowing work on shows and movies to resume; however, fear of contracting the virus has been ever-present. Tom Cruise famously exploded at crew members standing too close together during filming of “Mission: Impossible 7” in the UK, as it could easily have jeopardized the production.

Much-needed aid can’t come quick enough, but will likely be insufficient to effectively buoy the industry to anywhere near pre-pandemic levels. AMC recently issued a warning that it is running out of money and on the verge of going out of business. Its fate was not helped by Warner Bros.’ announcement that its entire slate of movies scheduled for release in 2021 will be simultaneously released to theaters and streaming service HBO Max. With movie theaters still shuttered in New York and Los Angeles, attendance was down 92 percent at AMC theaters in October and November. If that trend doesn’t turn around, the movie company would need over $750 million to keep its locations open.

A look back at 2020 reveals an ever darkening trend for the entertainment and live events industry. Early on, the pandemic halted movie and TV productions entirely and forced the cancellation of concerts and other live events. Media stocks plummeted and many people lost their jobs.

While the summer months saw a boom in streaming content and new remote work opportunities for executives at studios, production outfits, talent agencies, management companies and entertainment law firms, resurgent caseloads in California during the winter threatened to set the film and TV industry back even further. Many crew members were left out of work and struggling to qualify for unemployment benefits.

Traditional business models eroded and there is no recovery in sight for the theater community. In an interview with Variety, actor, director, singer and composer Lin-Manuel Miranda called the impact to the theater industry incalculable. “The loss to the theater community has…shown people who go into this way of life how fragile it is, how dependent we are on each other, and when the ability to gather is taken away, how long it can take. I’ve written recommendation letters for fellow actors who are going into other lines of work… I don’t know who is going to come back on the other side of it.”

Entering 2021, the global entertainment industry remains under duress. The South Korean entertainment market is retreating as the coronavirus surges there. The country’s strict masking, testing and contact tracing practices allowed it to resume production early during the pandemic, when many other parts of the world remained closed.

One bright spot for Korea, Latin America and the rest of the global entertainment industry going forward is animation. The larger the country, the greater its capacity to maintain animation levels, creating content and employing creative professionals. While remote work environments and the inability to collaborate in person could challenge creativity, animation remains one of the few areas of entertainment production able to continue at pre-pandemic levels and perhaps increase during the New Year.

An ongoing issue for all entertainment production remains securing insurance for projects. Lenders require it, and with the pandemic raging, it has been increasingly difficult to obtain. Independent and smaller producers outside of major studios rarely have the funding available to pay policy premiums, which exceed $400,000. A number of governments around the world have established compensation funds to help production companies struggling from shutdowns. As part of Media Insurance Network, the only worldwide Entertainment and Sports network, EPIC’s Entertainment Practice is tracking and documenting these schemes by country.

For more information, contact an EPIC broker.

Business Interruption Update

Throughout the pandemic, courts have disagreed as to whether or not losses arising from the pandemic constitute physical loss or damage. Most recently, in Missouri, a federal judge in the Western District ruled that a Kansas City restaurant could not recover coronavirus related business interruption losses under its insurance policy. Importantly, the judge questioned previous rulings that had found the virus to create a direct physical loss of or damage to property, and rejected the plain meaning of loss found in the dictionary.

The decision was a setback for policyholders seeking coverage for pandemic-related losses under business interruption policies. While insurers systematically are refusing to pay-out business interruption claims by asserting that the virus does not constitute physical loss, policyholders point to the physical nature of the virus and associated forced closures of property as grounds for payment of policy benefits.

In order to gain payouts, policyholders must prove the presence of the virus, which can be difficult. In the UK, the Financial Conduct Authority (FCA) offered guidance on how to prove the presence of the virus in business interruption claims arising out of non-damage business interruption losses resulting from government action in response to the pandemic. It will be interesting to see what affect such guidance has on cases in the U.S., such as America’s Kids LLC v. Zurich American Insurance Co. and Cinemark Holdings, Inc. v. Factory Mutual Insurance Co.

More than 1,300 lawsuits remain in U.S. courts against insurers refusing to pay claims on business interruption policies. Those lawsuits have been filed by a wide variety of businesses ranging from professional sports teams to salons and doctor practices.

On the legislation front, efforts continue to create a federal backstop to aid business owners in future pandemics, but no progress has been made since a hearing on November 19, 2020 to advance the Pandemic Risk Insurance Act. Opposition from republicans and insurers continues to halt progress. On a state level, efforts continue to provide relief for struggling retailers and businesses in the hospitality industry.

Contact an EPIC broker for more information.

Presumptive Compensability Legislation

A look back to 2020 reveals that workers’ compensation claims and premiums were down. AM Best reported recently that premiums decreased by 13 percent over the first three quarters of the year, likely due to a favorable loss frequency precipitated by remote work situations and layoffs in more hazardous industries.

Those statistics made workers’ compensation a harder hit segment of the property and casualty sector. Still, rebuttable presumption laws in states like California making it easier for workers to obtain workers’ compensation compensability remain an emerging risk for the industry. Another emergent risk comes in the vaccination rollout, which could create additional compensation claims for employers.

Should an employee develop an allergic reaction to a coronavirus vaccine, particularly if that vaccine is mandated by the employer, it could constitute an injury arising out of employment. Additionally, if the vaccine was given during employment, that could satisfy the “in the course of employment” requirement for compensability. In states with presumptive compensability legislation in place, the possibility of an adverse reaction to the vaccine creating a compensable event could be even greater.

Questions about whether or not coronavirus infections are covered by workers’ compensation have existed since the pandemic hit. The ability for the virus to be transmitted asymptomatically has proved a challenge from the outset.

Beyond the direct physical effects of the virus, employees’ mental health was negatively impacted by the pandemic, creating additional workers’ compensation realities for employers. A survey in the spring found 25 percent of workers reported experiencing burnout because of the pandemic.

An additional potential concern for rising workers’ compensation claims comes in a sudden return to the pre-pandemic work environment. Wary of losing their jobs, workers may rush back to the workplace without being fully prepared for the environment and risk injury or re-injury. Workers who remain at home could suffer from injuries like tech-neck and carpal tunnel arising from continued work at non-ergonomic home workstations.

Employees fortunate enough to be able to continue working onsite could face potential workers’ compensation claims from mask requirements resulting in troubled breathing. Such a situation could apply even to workers without breathing impediments or conditions like asthma.

The variety of scenarios that could lead to an increase in workers’ compensation claims is abundant and warrants continued attention by insurance, human resources and safety departments. For more information, contact an EPIC broker.

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.

• Pandemic driving is still down, but will insurers grant more relief?, New York Times, Jan. 1
• Trump extends coronavirus-related visa ban; health coverage policy advances, NBC News, Dec. 31
• Wuhan may have had 10 times as many cases as were reported, Business Insider, Dec. 30
• OSHA reminds employers coronavirus is a recordable illness, Business Insurance, Dec. 29
• U.S.’ coronavirus test requirement for UK travelers should extend to other nations – U.S. official, Reuters, Dec. 29
• Coronavirus revealed the fragility of supply chains, TechCrunch, Dec. 29
• Businesses use coronavirus testing and other tools to stay open during the pandemic, Inquirer, Dec. 28

HR & Employee Benefits Insights

What Will Work Look Like in 2021?

Some of America’s biggest brands are expanding factories and upgrading production lines on a wager that workforces will remain largely remote well into 2021. New work-from-home habits like quick lunches and beards are giving consumer companies a reason to invent new products designed for now remote workers. Those pivots follow an unprecedented period of growth for American grocers, whose sales have skyrocketed since the onset of the pandemic.

While many workers will continue to work remotely, others will return to physically distanced production facilities, revamped and retooled in light of lessons learned during the early months of the pandemic. In professional office settings, while work environments remain unchanged, benefits are in flux. Many employers are now making changes to vacation policies in light of workers’ inability to use them during the pandemic.

In the nation’s most populous state, work could look very different into 2021. Many California workers scraping to survive as delivery app drivers, for example, will continue to work longer hours without increased pay while enduring increased health risk. At the same time, some California companies are moving operations to lower cost states. In December, Oracle and HP, as well as Tesla, announced that they were moving their headquarters to Texas while maintaining a presence in California.

Across the nation, professional workers could continue working remotely for much of 2021, while workers in retail, manufacturing and industrial sectors could face distanced onsite working conditions. For remote workers, technology innovations in the virtual reality realm will aim to help colleagues connect virtually with immersive virtual office spaces. Such technology could help creative professionals and others who rely on collaboration for productivity, to deliver better results in a remote working environment.

For new employees brought on remotely in 2021, training and onboarding will present challenges that must be overcome through creativity and intentionality. Weekly virtual coffees, lunches and “open door” meeting opportunities with managers can help build culture even as employees continue to work together, apart.

Contact an EPIC team member for assistance with workforce and benefits questions.

How the Vaccine Rollout Could Impact the U.S. Workforce

With multiple coronavirus vaccines in distribution or planned distribution in 2021, the American economy and workforce will undoubtedly be impacted in various ways.

Widespread vaccination could provide a much needed boost, but substantive recovery will take longer – likely several years. According to a Deloitte Insights report, coronavirus fears will continue to drag down consumer spending until vaccinations are widely adopted. Four in ten consumers expect their financial status to improve as the vaccine is delivered, according to a Forbes Advisor-Ipsos Consumer Confidence Weekly Tracker, but nearly half of respondents expect their financial situation to remain unchanged.

Whether or not the vaccine is rolled out smoothly and quickly will make a difference in how well America, and the world, handle the next phase of the pandemic and eventual recovery. If most or all healthcare and essential workers obtain the vaccine, 80 million workers could safely return to the workplace without having to report symptom-free each day, which could lead to increased productivity.

It is unclear how many employees will be willing to return to the office, even after receiving the vaccine. Some will, but many more may prefer to continue working remotely. About a third of workers surveyed by Pew in October said they want the option to telework at least part time, even after receiving a vaccine or after the pandemic is no longer a factor.

Another wrinkle could come in employers’ requiring workers to obtain the vaccine. Some, like app-based driving companies, simply want their workers to be given priority access to the vaccine, while other employers want to require their employees to receive it. The federal Equal Employment Opportunity Commission said employees could be barred from the workplace if they refuse to take the vaccine when it is required by their employers. This guidance confirmed what had been expected by employment lawyers as employers are widely viewed as a critical cog in the vaccination campaign and national effort to achieve herd immunity.

The EEOC’s confirmation that a coronavirus vaccination by itself would not violate the Americans with Disabilities Act (ADA) means a vaccination is not considered a medical examination. There is another reason beyond compulsory requirements that could motivate people to get vaccinated; tech companies are creating apps that would prove vaccination status and a vaccine passport could be required for travel in 2021. While such a step would mark an unprecedented move, it could ultimately prove critical in opening airports, theaters, concert venues, restaurants and workplaces.

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:

• Consolidated Appropriations Act, 2021 Expands Cafeteria Plan Flexibility, December 28
• Top 3 Risk Management & Benefits Solutions for Law Firms in 2021, December 22

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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