Insurance and Force Majeure, and COVID-19

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Many of our clients are experiencing Coronavirus related business losses. There may be one or more different factors causing these business disruptions and losses and each raises a host of legal questions. Do I have insurance to cover these losses? Did I have a covered physical loss? What caused the loss, is it excluded, or is it concurrent? What other coverages may be available under my policy? Are there civil authority, extra expense, ingress/egress, service interruption, contamination or communicable disease coverages or is there a bacteria/virus exclusion? If sued for a Coronavirus event, will I have coverage to defend and indemnify my business? Are my officers and directors’ coverages or employer liability coverages implicated? What about workers’ compensation insurance?

In addition to the insurance questions presented, our clients are asking about what happens if a contract cannot be performed either by their business or by a business with whom they have an agreement (often described as a force majeure event)? What risks do they face and what recourse is available to them, if any, under these circumstances?

The COVID 19 crisis is drawing many private businesses, courts, governmental entities, and insurance carriers into uncharted waters. Navigating through this crisis will not be easy. To our clients, we recommend: (a) review your insurance policies, being especially sensitive to the wide array of possible provisions and exclusions that affect coverage; (b) consider carefully the notice requirements for filing claims with your insurance carrier; (c) determine how best to value or calculate the losses you have suffered; and (d) think about how you might mitigate or reduce your covered losses. Each of these considerations present complicated issues that must be prudently navigated.

If you have a contract with a force majeure clause, carefully review the contractual definitions. Determine whether performance may be impracticable if the Uniform Commercial Code is applicable. How courts interpret these clauses is important to understand.

Answers to your insurance questions will vary based upon the particular language of your insurance policy, the facts surrounding your claim, and the statutes and judicial decisions applicable in your state. The same is true for force majeure provisions-implicating the language, facts, and law of your specific situation.

Underwood’s Lawyers are sensitive to the legal questions presented by these unprecedented times. We welcome the opportunity to assist you in analyzing these complex issues and finding the best path forward. To discuss this further please contact Wade Arnold (Wade.Arnold@uwlaw.com) who is heading that group.

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