Business Interruption Insurance and COVID-19

The COVID-19 pandemic and the various measures designed to contain its’ spread has had an unprecedented impact on the business community.  Many businesses, such as those in the hospitality sector, have had to cease or drastically curtail operations with uncertain prospects for a restart.  Not-for-profit organizations are seeing fewer donations at a time when many are seeing a higher demand in services due to the human toll of social isolation.  Businesses on the other end of the spectrum that have been able to continue uninterrupted are certain to be impacted in the future due to the economic slowdown.  Suffice it to say that the vast majority of organizations have had some level of negative impact in the past two months that will continue in the near future.

 

Business Interruption insurance has been a frequent topic in recent weeks as a possible avenue for organizations to recover lost profit and pay for continuing expenses.  There have been a number of high-profile lawsuits against insurance companies for denying these claims.  A recent and local example is the lawsuit by Legal Seafoods against their insurance carrier for a claim denial. Insurance policies vary in the scope and range of coverages so it is impossible to state that all of these types of claims should be covered or denied.  However, we believe that the majority of these claims face difficult prospects for recovery.

 

Business Interruption (also known as Business Income) is a coverage commonly found on commercial property insurance policies.  In some cases, there is a specified limit while other types of policies designed for smaller businesses are written on an “actual loss sustained” basis for a 12-month period.  The coverage is designed to allow a business to recover continuing expenses (payroll, rent, leases, taxes, etc.) and lost profit when it sustains a covered property loss that results in a shut down or curtailment operations.  An additional component called Extra Expense is often included with Business Interruption.  Extra Expense addresses the additional costs a business sustains over and above normal operating expenses that are required to expedite recovery.  A shut down required by “Civil Authority” is a common feature that can extend coverage when a municipality mandates that a business close due to some form of physical damage in the nearby proximity (i.e. gas main explosion).  In all cases the coverage trigger is a covered property loss such as fire, wind, vandalism, or collapse.

 

There are several challenges for Business Interruption claimants but two of them stand out.  The business closures or curtailments have been primarily due to government mandates designed to minimize or slow the spread of a virus.  In most cases there was no physical damage or direct contamination requiring the business closure.  Secondly, most policies contain a specific exclusion for a virus.  Exclusions for communicable diseases and viruses were almost universally added starting in 2006 as a result of SARS and have been reinforced by other outbreaks such as H1N1 and Zika.  The primary reason for these types of exclusions is that an event or series of related events impacting millions of individuals and businesses throughout the country at the same time period is “uninsurable”.   It is estimated that the monthly impact for COVID-19 is in the $250 to $350 billion range.  By comparison, the aggregate insured loss from natural disasters was $52 billion in 2018 for the full year.

 

Legislation has been introduced in a number of states, including Massachusetts, designed to compel the insurance industry to pay for Business Interruption losses due to the COVID-19 related shut downs.  These legislative actions will be contested on constitutional grounds that will likely draw out for years.  Perhaps a solution can be developed that is similar to how Congress and the insurance industry responded to the September 11th attack.  From purely an insurance point of view, the attack on September 11th was an unforeseen tragedy that generated more than $40 billion in losses in addition to the human toll.  Human and economic losses continue with high levels of cancers for first responders that worked on recovery at World Trade Center.  Congress and the insurance industry developed the Terrorism Risk Insurance Act that allowed insurance companies to absorb the initial $200 million in claims associated for a single terrorist event with the Federal government taking on the excess.

 

We have spoken with many of you over the past few weeks regarding this issue.  We encourage any of you with questions on this issue to reach out to us.  Some of you have decided to file claims and we are certainly willing to discuss and assist others that might be contemplating the same action.  Situations are unique and policy conditions can differ.  We wish all of you a speedy recovery from the recent events and, above all, good health.

Time For Spring Home Maintenance?

 

 

You may want to start with simple spring cleaning tasks:

  • Change and/or service your furnace filters, HVAC, smoke and CO detector batteries
  • Deep-clean your oven, dishwasher, coffee maker and outdoor grill, as well as drapes, upholstery, cabinets, floors, vents and baseboards
  • Clean your mudroom, garage and outbuildings, and, in the process, inventory items that need replacing

Check out the Chubb Insurance brochures: How to Prepare your Home and Garden for Spring and Summer infographic or their Top 10 Spring Cleaning Tasks for more ideas and tips. Also, it’s important to remember there are common household cleaning products you should never mix, such as bleach and ammonia or bleach and rubbing alcohol. Learn more.

Then tackle more involved home maintenance inventory projects.

We can all use a little help keeping track of the home maintenance projects we need to do, and now there’s software and technology that can help.

With the HomeZada app, you can manage your home and projects, keep a digital inventory of your photos, receipts, and documents, create a home maintenance schedule program, and manage remodeling projects. HomeZada generally charges $60/year, but Chubb PRS clients are eligible for a rate of $45/year. Click here to get HomeZada now.

Stay safe in the process.

Cleary Insurance wants to make sure you and your family stay safe and healthy. Only handle projects yourself that you feel you’re truly qualified to do. You may be better off leaving projects with electrical components or those at heights, for example, to professionals who have the right equipment and skillset.

 

Simple Ways to Improve Your Health

 

Get Active:

Did you know that exercising regularly could help you fight off chronic conditions and diseases? Exercise can help control your blood pressure, blood sugar and weight, raise your “good” cholesterol, and prevent diseases such as colorectal cancer, heart disease and Type 2 diabetes. If you’re ready to get active, keep the following tips in mind:
  • Get at least 150 minutes of moderate-intensity aerobic activity (e.g., briskly walking) or 75 minutes of vigorous-intensity aerobic activity (e.g., running) every week.
  • Incorporate muscle-strengthening exercises at least two days a week.
  • Avoid injuries by doing the following three steps each workout:
    • Warm up: Warming up allows your body time to adjust from rest to activity. Always remember to gradually increase the intensity of your warmup to reduce stress to your bones, muscles and heart.
    • Cool down: As with warming up, cooling down should include movements similar to those in your workout, but at a gradually decreasing level of intensity.
    • Stretch: After cooling down, stretching helps to build flexibility and range of motion. When stretching, remember to use gentle, fluid movements and to breathe normally.

Getting a Good Night’s Sleep

Getting enough sleep isn’t always possible, but inadequate sleep is a bigger problem than you may think.  Getting an adequate amount of sleep is vital to staying healthy and avoiding fatigue. Fatigue causes drowsiness, moodiness, loss of energy, inability to focus, and lack of motivation and alertness, which can, in turn, cause decreased productivity and even be a safety hazard. Aim for seven to eight hours of sleep each night. Even if it means rearranging your schedule, make sleep a priority.
If you are struggling to fall asleep or get a restful night’s sleep, try the following tips:
  • Maintain healthy habits, such as eating nutritiously, exercising regularly, managing your stress levels and not smoking—all of which will help you sleep better at night and give you more energy throughout the day.
  • Create and stick to a sleep routine. Go to bed and wake up around the same time each day, including on weekends. Make sure your bedroom is a comfortable temperature and is quiet. Find a relaxing pre-sleep activity, such as listening to soft music or reading.
  • Limit caffeine, alcohol, nicotine, large meals and rigorous exercise within a few hours of bedtime.

 Eating 101

Eating a well-balanced diet is key to maintaining your health. In fact, improving your diet could help you live longer and reduce the chances of developing costly chronic diseases. Keep the following tips in mind when you’re getting started on your healthy eating journey:
  • Get a personalized eating plan. Speak with your doctor to develop a plan that will give you the amounts of each food group you need daily. Your doctor may recommend you seek out a registered dietician or nutritionist to create the best plan for you.
  • Set realistic goals. You are more likely to succeed in reaching realistic goals when you make changes gradually. Start with small changes.
  • Balance your plate with a variety of foods. Fifty percent of your plate should be filled with fruits and vegetables, 25 percent with lean meat, poultry or fish, and 25 percent with grains.
  • Eat slowly. It takes between 15-20 minutes for your brain to get the message that your body is getting food. When your brain gets this message, you may stop feeling hungry.
  • Practice portion control. A portion is the amount of food you choose to eat. Talk with your doctor or visit the United States Department of Agriculture’s website to learn more about proper portion sizes and daily food intake customized to your age, gender and activity level.
Please speak with your doctor if you have questions about fitness programs and/or healthy eating or how you can get started.   If these tips do not help you sleep better, or you suspect you have a sleep disorder such as sleep apnea or insomnia, see your doctor.

Financial Moves to Consider During the COVID-19 Pandemic

 

The COVID-19 outbreak has spurred an economic crisis as well as a health-related one. Millions of Americans are now unemployed, frightened, and wondering how they’ll pay their bills in the coming weeks or months. And while it’s a scary time to be living through, there are a few moves you can make to protect yourself financially.

  1. Boost Your Emergency Fund (if possible) – Having emergency savings is crucial at all times, but it’s especially important during periods like this, when unemployment is rampant and economic uncertainty abounds. A solid emergency fund is one with enough money to cover three to six months of essential living expenses, and right now, it certainly wouldn’t hurt to hit the higher end of that range. If you’re still working, use your paycheck to pad your savings — especially if you don’t have three months of expenses in the bank.
  2. Leave Your Stock Portfolio Alone – The stock market has been swinging lately, and while it may be tempting to cash out investments to avoid further losses, doing so will only lock in any losses you’re already looking at. Rather than go that route, remind yourself that if you sit back and ride things out, the stock market is likely to recover in time. That said, you don’t have to leave your stock portfolio alone if what you’re doing is buying more stocks. Now’s a great time to invest in quality companies whose stock is on sale, so if you’re good on the emergency savings front, you can use your spare cash to add to or diversify your portfolio.
  3. Keep Putting Money Away For Retirement – When the prospect of unemployment looms over you, you may not give a hoot about what your finances will look like 20, 30, or 40 years from now. But just as now’s a good time to add to your stock portfolio, so too is it a good time to keep funding your 401(k) or IRA, provided you’re financially able to do so. The money you invest in that account now can be used to score discounted investments that could grow exponentially over time.
  4. Apply For a Home Equity Line of Credit – Even if you’re still working today, you never know whether the ongoing crisis will force you out of a job. And if you’re already unemployed, it could take quite a long time to secure a paycheck again. As such, having access to extra money is crucial, so if you’re low on emergency savings but own a home, it could pay to apply for a home equity line of credit. That way, you’re not borrowing money you immediately accrue interest on, as would be the case with a home equity loan. Rather, you’re giving yourself the option to borrow as you need to.

A final thought: The most important thing to do now is take a deep breath and resist the urge to panic. Panic leads to irrational thinking, which leads to poor financial decisions.  The COVID-19 pandemic is a terrible and frightening situation. There’s uncertainty surrounding how long the outbreak will last, how bad it will get, and many other variables. But we will get through it. So make some smart and rational financial decisions and focus on what’s really important — your health and the health of the people you care about.

 

Works Cited
Backman, Maurie. “5 Smart Financial Moves to Make During the COVID-19 Outbreak.” The Motley Fool, 7 Apr. 2020, www.fool.com/retirement/2020/04/07/5-smart-financial-moves-to-make-during-the-covid-1.aspx. Accessed 7 May 2020.
“Coronavirus and Your Finances: Here’s How to React.” The Ascent, 13 Mar. 2020, www.fool.com/the-ascent/banks/articles/coronavirus-finances-how-to-react/.