Businesses pivoting operations during coronavirus face added exposures

Businesses pivoting operations during coronavirus face added exposures | Insurance Business

Businesses pivoting operations during coronavirus face added exposures

Companies in the US are having to adapt to the new business environment in which they’re operating as the country continues to see a significant number of confirmed cases of coronavirus and related deaths. This pandemic in turn has created several new risks that could have an impact on commercial insurance coverages.

Businesses in the food service space have been especially hard-hit by the coronavirus. The National Restaurant Association has reported that, since March 01, the industry has lost more than three million jobs and $25 billion in sales, and roughly 50% of restaurant operators anticipated having to lay off more people in April.

In states like New York and California that instituted strict shutdowns, AmTrust Financial Services experts have seen a number of restaurants that have been closed temporarily and many are trying to pivot to a takeout model, albeit with a fairly skeletal crew.

“Restauranteurs are trying to keep [operations] going with whatever resources they can to get by and keep a little bit of revenue flowing in during this period,” said Matt Zender, AmTrust Financial Services’ senior vice president of workers’ compensation strategy. “A number of folks who are working in these restaurants are not blessed with a lot of resources that allow them to be off work for a long period of time and that’s what has a lot of us concerned.”

Several workers’ compensation related risks could arise during this time, such as people who are now delivering food that didn’t have these responsibilities before and potentially aren’t as familiar with doing this safely, and more broadly, new employees coming into unfamiliar roles.

Read more: How workers’ comp carriers are responding to the pandemic

“Some of the businesses that are perhaps thriving through this pandemic, such as perhaps pizza delivery, they’re hiring staff and those staff will be new and unfamiliar,” said Zender. “There’ll be some folks dealing with some new job responsibilities that they hadn’t been working with before and I could see some issues with that.”

Other food businesses taking center stage during the pandemic have been grocery stores, many of which have remained open during the crisis as an essential business. These employees face a whole host of other risks over the course of their work.

“Grocery employees are clearly finding themselves on the frontlines in a method and manner that they could not have expected a month ago,” explained Zender. “There’s the stress of their environment, which is certainly palpable. Additionally, there’s the stress of supply chain and getting the items back on the shelves as quickly as possible. Clearly, grocery stores are seeing a spike in revenue and that puts stress on the entire system too, whether it’s delivery or warehouse or stocking, to keep the supply running through the chain, so there will be increased claims in that space.”

Nonetheless, workers’ compensation isn’t the only line of business that could be impacted by the coronavirus. The outbreak also poses risks to directors’ and officers’ insurance. The D&O marketplace has been in a stabilization period going back to the fourth quarter of 2018 and throughout the full year of 2019 across basically every sector of the class of business, according to Christine Williams, chief executive officer in Aon’s financial services group. Premiums and retentions went up last year as insurers were deploying less capacity, and challenges will continue into this year.

“In 2020, many of our clients who are buying D&O are in a marketplace that is certainly challenging right across all sectors, with some sectors being impacted more. Probably most notably with COVID-19 right now is the hospitality sector,” explained Williams. “We anticipate additional litigation … there have been two claims that were filed last week and we’re starting to track the claims that are going to come in this week.”

Claims will likely be in the form of either securities class action or derivative suits, and the most likely allegations in the coming months are going to stem from failure to disclose the impact of COVID-19. Additionally, how directors and officers have handled the event and if there was any mismanagement will likely come up in some D&O claims.

Read more: Insurers examining coronavirus exclusions - reports

Aon is also keeping a close eye on any COVID-19 exclusions that are being imposed by insurers in D&O policies, which thus far have not appeared, though insurers have changed their approach in other ways.

“We are starting to see insurers come to us with additional questions,” said Williams. “They want to ask clients about the COVID-19 exposure and potential impact it’s going to have on their business for the rest of this year, which is very difficult for people to get their arms around right now. They want to see how they’re mitigating it and what their financial strength is, if they do have to take a hit to their financials.”