Effect of Coronavirus (COVID-19) on Businesses and Insurance Claims


Beyond the immediate health concern for family, friends, and coworkers at home and abroad, the COVID-19 coronavirus is a significant concern to businesses here in Southern California. Many of SoCal’s businesses rely on components and/or finished goods from China and have experienced supply disruptions. Brick and mortar B2C companies are justifiably concerned about a possible drop in foot traffic if patrons begin to limit their travel and exposure to public spaces. And, of course, the health and welfare of our employees is of paramount importance for our businesses and our chief concern.

Milestone’s team has consulted with insurance carriers, safety consultants and claims adjusters to ensure our clients are aware of the potential impact on their organization. This is a dynamic situation that is evolving quickly, and we will keep our clients and partners updated as we continue to assess the situation.

There are several questions a company should contemplate regarding their potential to be impacted by the current health concern. These questions should be continually revisited as data continues to unfold over the coming weeks.

Employee Health & Safety

Do we have employees located in or traveling to areas where there have been diagnosed cases of COVID-19?

Do our employees work in close physical proximity to the public and have an increased likelihood of exposure to infected individuals (e.g. healthcare, retail, hospitality)?

Do the vendors or clients coming to our place of business have an increased likelihood of having been exposed to the COVID-19 virus?

Does our company have an Exposure Control Plan or employee safety training for COVID-19?

Coverage Considerations – Worker’s Compensation, Employer’s Liability & General Liability

In most circumstances and for most industries, the contraction of an illness at work would not be considered a work-related claim if the employee was at no greater risk than the general public to contract the disease. However, it is our current estimation that if a worker can confirm that they were exposed to the COVID-19 virus in the course of their employment, then any medical costs and lost time from quarantine, monitoring or illness will be compensable. In California and most states, “exposure” constitutes an injury, not the onset of symptoms.

It is also possible that an employee that contracts the COVID-19 virus through work-related activities could claim their exposure was due to the employer’s negligence, resulting in an employer’s liability claim. If a family member of the employee is infected by the employee, that individual or individuals could also make a claim via the employer’s liability coverage or general liability.

It is important to have an Exposure Control Plan and to provide safety training to impacted employees. Our partners at EMS Insite have prepared an Exposure Control Plan Template as well as a Coronavirus COVID-19 training in English and Spanish. You can download these important resources at the links above.

Business Continuity Questions

Is it possible to source components or finished goods from sources outside areas where production is substantially diminished?

What actions can we take to ensure the general public that our facilities and public spaces are a safe and clean environment?

Do we have a contingency plan in place to manage and address concerns from our employees or patrons?

Coverage Considerations – Business Interruption, Loss of Rents and Property

A business interruption loss (or loss of rents) is triggered when the insured experiences a “direct physical loss or damage to insured property by a covered cause of loss.” It is our opinion that in the event of a claim for COVID-19 related business interruption, most carriers will dispute whether this “physical loss” requirement has been met.

However, there is no uniform rule for when a “physical loss” has occurred. In some cases, if a property has experienced contamination or other incidents that render a property uninhabitable or otherwise unfit for its intended use, this has constituted a “physical loss”.

Therefore, a determination of whether an acceptable loss to property has sufficiently occurred to trigger business interruption coverage will require an individual examination of each case.

In certain circumstances where a “civil authority” has prohibited or limited access to an insured’s location, the “civil authority” coverage in the property’s business interruption coverage may apply.


This potential pandemic situation is affecting everyone and every business uniquely. This is a dynamic and evolving situation where not only is the future unpredictable, but the current status is unknown due to a lack of testing capacity and unreliable government data.

If confirmed cases of infection rise exponentially in the US, this will tax our health care system, businesses and personal lives beyond any of our experiences. Our aim is not to be alarmist, but to be prepared as risk managers to assist our clients for the variety of possible outcomes that may occur with this outbreak.  Of course, we are all rooting for the “this is just a flu” crowd to be correct. However, as business owners or executives with employees we care for and business we have worked hard to build, it is our job to examine the possibilities, assign probabilities and prepare.

We are here to assist you in protecting your business and are available to discuss any questions you may have. Please feel free to reach out to us about any concerns.

John Hoefer



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