Covering Coronavirus: Risk Considerations

EPIC Risk Advisory Bulletin

Volume 2, Issue 6

In this issue, we take a focused look at:

1. Insurance Products and Coverage Information
   • D&O Coverage: What’s Next?
   • Virginia Passes Consumer Data Protection Act
   • Business Interruption
   • Presumptive Compensability
   • News of Note
2. Human Resources and Employee Benefits
   • OSHA Launches New Coronavirus Initiatives
   • Webinar: Are You Ready for an OSHA Visit?
   • Return to the Office?
   • Vaccine Update
   • 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.

Insurance Products & Coverage

D&O Coverage: What Comes After the Pandemic?

As the coronavirus pandemic shows signs of shifting into a new phase, a wave of litigation targeting D&O claims could be on the horizon. Decisions companies made to continue operating during the challenging circumstances brought on by the pandemic could be called into question as pre-pandemic work and life behaviors resume.

Public statements companies made in response to pandemic challenges could prompt securities litigation in the form of direct and derivative securities claims, as well as class action lawsuits if those public statements are found to be false. Additionally, companies’ financial statements could be scrutinized if they suffered substantial losses from issues brought on by the pandemic.

In all of these cases, D&O insurance could come into play, as it is designed to protect directors and officers of a company from claims alleging that mistakes, poor judgement or negligence caused the company to suffer loss or incur liability. Specifically, “Wrongful Act” language in D&O policies typically guard policyholders in those instances.

It remains to be seen how policies will respond if a large number of cases are brought against directors and officers for their companies’ response to the pandemic. If a flood of cases ensues, insurers may attempt to limit future liability by adopting restrictive policy language interpretations that would limit the scope of wrongful acts by excluding actions related to the pandemic. Bodily injury and pollution exclusions could be raised in cases related to the coronavirus, even potentially in securities claims.

Additionally, insurers may try to limit their exposure by adding virus or civil authority exclusions or limitations at policy renewals. Companies may find it helpful to provide notice of circumstances letters to insurers ahead of potential claims as doing so could preemptively trigger coverage.

Another emerging issue is a case law trend involving state jurisdiction in D&O cases. “A recent decision by the Supreme Court of the State of Delaware affirmed a lower court ruling stating that Delaware had a more significant relationship than California to a D&O policy. This was despite the fact that the policy was negotiated and issued in California, given the dispute involved a Delaware corporation and its directors and officers,” noted Kelly Geary, EPIC National Practice Leader, Executive Risk and Cyber. “The case is part of a continuing trend in the case law showing a growing tension between Delaware courts and other state courts regarding important and consequential choice of law issues.”

For more information about this evolving issue, contact an EPIC broker.

Virginia Passes the Consumer Data Protection Act

On March 2, 2021, Gov. Northam, D-Va., signed the Virginia Consumer Data Protection Act (VCDPA) into law. In doing so, Virginia became the second state to enact comprehensive privacy legislation and the first to do so on its own initiative. Kelly Geary sees some similarities to the privacy law passed by California.

“California was the first state to pass a comprehensive privacy law – the California Consumer Privacy Act (CCPA) – but the California legislation was driven largely by ballot initiative,” Geary says. “The provisions of the VCDPA are very similar to the CCPA and draw heavily on the proposed Washington Privacy Act.”

The new law applies to:

• entities that conduct business in Virginia,
• or produce products or services targeted at Virginia residents,
• and control or process personal data for at least 100,000 consumers during a 12-month period;
• or control or process personal data for at least 25,000 consumers and generate at least 50 percent of their gross revenue from the sale of personal data.

Unlike the CCPA, there is no minimum revenue threshold for affected entities. As a result, even large businesses may not be subject to the new law. Additionally, the Virginia law doubles the number of residents’ data that must be collected or processed before it is applicable to a given company.

For more details about the VCDPA, access this helpful article from IAPP.

For more information about how this law may impact your business, contact an EPIC broker.

Business Interruption Update

A year after the onset of the pandemic, more than 1,500 coronavirus-related business interruption lawsuits have been filed in state and federal courts across America. In federal courts, insurers have won an overwhelming number of cases, obtaining full or partial dismissals in 173 of the 188 motions to dismiss filed and adjudicated to date. The situation has been less one-sided in state courts, where policyholders have won motion to dismiss cases 51 percent of the time. When considered together, however; insurers are winning about 80 percent of motions to dismiss.

Interestingly, more than two-thirds of those motions to dismiss have involved policies with exclusions for losses resulting from communicable diseases. A common challenge for policyholders has been the interpretation of policy language defining physical loss or damage. Some courts define physical loss or damage as the loss of use, while others limit it to tangible harm caused to a property’s physical integrity or state.

This debate continues to play out on a near daily basis. Recent high profile cases have seen franchises like Wendy’s, Marriot, Hilton and T.G.I. Friday’s lose to insurers over a lack of physical loss or damage; a New Jersey clothier lose due to a virus exclusion in its policy language; National Coatings & Supply, Inc. to lose to Valley Forge Insurance Co. because of a policy provision excluding loss or damage caused by microbes; Indiana Repertory Theatre to lose to Cincinnati Casualty Co. because of its inability to prove accidental physical loss or damage from the virus; and a group of Atlanta restaurants to lose for the same reason.

Nashville Underground’s efforts to collect a claims payout under a food contamination provision in its property policy also proved fruitless. With high profile policyholders like Caesars Las Vegas and the Philadelphia Eagles football team bringing suits against insurers, it remains to be seen if those efforts will result in different outcomes. Caesar’s, which is seeking restitution for more than $2 billion in losses, has no virus exclusions in its all-risk policies and claims its coverage should be triggered even in the absence of physical loss or damage.

For more information on this evolving situation, contact an EPIC broker.

Presumptive Compensability Legislation

States continue to introduce both coronavirus presumptive compensability legislation and liability shield laws in an effort to deal with the expected flood of liability lawsuits related to the coronavirus.

In West Virginia, SB 277 gives businesses immunity from liability lawsuits related to the virus. Alabama and Montana have enacted similar liability shield laws. Other states, including Georgia, Idaho, Iowa, Kansas, Louisiana, Michigan, Mississippi, Nevada, North Carolina, Ohio, Oklahoma, Tennessee, Utah and Wyoming, passed similar legislation last year.

While these laws have not yet been tested in court, it is reasonable to assume they will as workers return to their pre-pandemic work environments throughout the year. Thus far, the pandemic has had no notable impact on the workers’ compensation residual market, according to the National Council on Compensation Insurance. Workers bringing suit are expected to face a difficult road in proving their employers are responsible for their exposure to the virus and any negative consequences from that exposure.

As this continues to be an evolving issue, the National Law Review has compiled a helpful list of the state, territorial and local government policies (proposed or passed) in response to the ongoing coronavirus pandemic.

It is organized by state and is available online

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.

• Community-spread study may provide coronavirus compensation defense, Business Insurance, March 24
• Insurance giant CNA hit by sophisticated cybersecurity attack, Chicago Tribune, March 24
• NYC venues reopen but raise coronavirus concerns, Wall Street Journal, March 22
• Tourism groups push US to eliminate travel restrictions, Washington Post, March 22
• Marketers plan giveaways for coronavirus vaccine recipients, Wall Street Journal, March 22
• CA governor signs new 80-hour coronavirus supplemental paid sick leave law, National Law Review, March 21

HR & Employee Benefits Insights

OSHA Launches New Coronavirus Initiatives

On the day he was inaugurated, President Biden issued an executive order that tasked the Occupational Safety and Health Administration (OSHA) with launching a national coronavirus violation enforcement program. Its first initiative was to review and correct any shortcomings in previous enforcement strategies. Secondly, it was to determine whether Emergency Temporary Standards (ETS) were necessary.

If the ETS were found to be needed, OSHA was to issue them by March 15, 2021. On March 12, OSHA published two initiatives to boost safety enforcement during the pandemic, but stopped short of issuing any Emergency Temporary Standards.

The first initiative, Coronavirus National Emphasis Program (NEP) Directive, aims to significantly reduce or eliminate workplace exposure to the virus. OSHA will focus its resources on industries and worksites with high frequencies of close contact exposure, such as healthcare, restaurants, grocery stores, warehousing and correctional facilities.

The second initiative is an update to OSHA’s Interim Enforcement Response Plan and an emphasis on onsite inspections wherever practical, or the use of an onsite/remote approach when necessary. The agency will only use remote-only inspections when onsite inspections cannot be conducted safely. The plan relies heavily on CDC guidance to assess the safety of workplaces in relation to the virus.

All violations of the Emergency Temporary Standards are expected to take precedence over any general duty clause citations, and will be prioritized accordingly by OSHA.

For more information, contact an EPIC team member.

Webinar: Are You Ready for an OSHA Visit?

Join EPIC and Ogletree Deakins on Thursday, April 1 at 10 a.m. PST to learn how to prepare for a visit from the Occupational Safety and Health Administration (OSHA), should it happen. EPIC colleagues will be joined by Ogletree Deakins, a leading labor and employment law firm.

The webinar, “What to Do When OSHA Comes Calling, will cover the following topics:

• OSHA Enforcement
• Reporting a Serious Injury or Fatality
• Special COVID Considerations
• Action Lists and Takeaways

Return to the Office?

As vaccinations reach more of the American population, businesses are beginning to bring their workforces back, at least in part, to their pre-pandemic work environments. Microsoft announced its plan to begin allowing workers to return to its headquarters in Washington State on March 29, giving 57,000 non-essential employees the choice to either work from the office, home, or a combination of both. The tech giant will require employees to wear masks and maintain social distancing and will remove restrictions only when the coronavirus reaches an endemic stage, similar to the yearly flu virus.

President Biden welcomes the move, as his administration has stated a desire to return to normalcy in life and work habits by July 4, but new virus variants and localized infection surges shed doubt on the viability of that goal. The return to the office effort has largely varied by industry and location. Firms in the finance industry have been more aggressive in bringing their workers back, while tech firms like Google and Facebook have embraced a fully flexible workweek. Twitter has said its staff can work from home permanently if they desire. Target has likewise stated its plan to make remote work for its headquarters workforce a permanent part of office life. The move will see the retail giant downsize one-third of its office space in downtown Minneapolis.

Outdoor retailer REI sold its brand new headquarters space in Bellevue, Washington, to Facebook for $390 million last year, before it had even moved in employees. Rather than have a single corporate headquarters, REI is taking a tact that other employers, including EPIC, may follow – the creation of several satellite locations organized by region, and the continued ability for employees to work remotely as a normal location of employment.

These remote work decisions may be made partly in light of fluctuating commercial property prices. In New York, only 20 percent of employers say they will insist that workers come back to the office, which means four in five Manhattan office workers may not return to pre-pandemic office environments in a full-time capacity. Many employers in New York City plan to keep staff in at least a hybrid schedule through September of 2021.

Another concern influencing return to work decisions is the potential for litigation. Zoom fatigue and a desire to return to in-person work environments where employees can network, interact and work with colleagues face to face is driving a desire by many professionals to push for office re-openings. Yet, no option is without challenges or downside.

Not only will companies face claims from onsite workers alleging unsafe work environments, but remote workers may file discrimination claims related to who employers choose to allow to return to work versus a remote setup. Even requiring employees to show proof of vaccination could lead to potential lawsuits, although this is unlikely to succeed, particularly in states like New Jersey that have said employers may mandate them.

Even the standard 40-hour workweek could become a relic as companies move to more flexible work schedules. Some employers may choose to move to employee productivity output as a measure of performance instead of the number of hours worked. Worker misclassification and timekeeping errors have already increased during the pandemic; they are expected to continue as workers remain in a hybrid or fully remote arrangement.

For more information about how this evolving topic affects your business, contact an EPIC team member.

Vaccine Update

America’s top infectious-disease official, Dr. Fauci, has said that vaccinating 70 to 85 percent of the U.S. population would enable a return to normal work and life behavior. While the U.S. hit its goal of 100 million vaccinations six weeks early, and averages more than 2.5 million vaccinations a day, challenges and inconsistencies remain.

A fast vaccine rollout backfired in states like South Carolina, Florida and Missouri, while states like Hawaii and Connecticut, which proceeded more slowly and methodically, are now seeing greater numbers of residents vaccinated. Vaccine supplies have proved insufficient or unpredictable in some states, while millions of doses of Johnson & Johnson’s single dose vaccine have sat unused in storage. And, while the promise of a fourth vaccine, AstraZeneca’s single shot, offered hope of even faster inoculation nationwide, concerns over the validity of its testing data have stalled its approval by the Data Safety Monitoring Board , an independent committee overseeing the drug trial.

Some states, including, Texas, Georgia, Indiana, Alaska, West Virginia, Mississippi, Utah and Tennessee, are making all adults eligible to receive the vaccine there, while others, like Nebraska, are rolling out their vaccines on an age-only basis, prioritizing older populations and not moving to younger ones until all members of the older populations have been vaccinated.

Meanwhile, fresh concerns over the prevalence of variants in the U.S., including the more contagious UK strain, B.1.1.7, are raising questions about the efficacy of available vaccines to prevent serious infection in individuals who contract it. Taken together, the situation spells a potentially bumpy next five or six months, the length of time it is expected to take to vaccinate three quarters of the American population.

For more information about how vaccination efforts may affect your business, contact an 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. The most recent articles include:

• Joint Agency FAQs Clarify Health Plan Coverage of Coronavirus Tests and Vaccines, March 24
• OSHA Launches National Emphasis Program on Coronavirus, March 24
• Webinar Recording: Breaking Down the Employee Retention Credit, March 23
• Virtual Health Fairs – How to Plan for 2021, March 23
• Why You Need a Specialist to Control Pharmacy Spend, March 19
• Latest Stimulus Bill Means Major Changes to COBRA Continuation and Benefits, March 17
• Virtual Care – The New Normal? March 16
• Webinar Recording: The Impact of the American Rescue Plan Act, March 16
• New Coronavirus Relief Law is no Relief for HR Departments, March 11
• Significant Employee Benefit Changes Contained in the American Rescue Act, March 11

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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