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“Business interruption” has been the subject of discussion in the news media. Government measures implemented to slow the spread of COVID-19 include the temporary shuttering of “non-essential” businesses, such as bars and restaurants. The issue being raised is whether those businesses can turn to their insurance carriers to cover the lost income resulting from being forced to close. “If there’s not property damage, technically business interruption can’t apply,” explains Ms. Fitts. That means that business interruption coverage is not intended to cover a community association’s lost income if owners stop paying assessments for some COVID-19 related reason. However, the insurance carriers are monitoring the situation in Europe where there is a movement to force the larger companies, who are considered our re-insurers, to cover that exposure. Even if such a movement does not take hold here in the U.S., what happens in Europe could impact policy premiums here in the U.S. Notwithstanding any attempt by for-profit businesses to seek coverage for loss of income, Ms. Fitts emphasized that “business interruption” does not cover an association’s loss of assessments. Ms. Fitts explains, “an example is an association that owns units that are rented out, [the association] has a fire, and the renter must move out. ‘Business interruption’ could pay for the loss of rent. Same fire and the manager has to move the office off site. The rent for the temporary office could be claimed.” In other words, owners failing to pay assessments due to COVID-19 does not involve property damage, and therefore, does not trigger any coverage under “business interruption”; “business interruption” simply does not cover non-payment of assessments.
Claims that most directly relate to COVID-19 involve workers’ compensation insurance. Several states, including Illinois, have taken measures to extend workers’ compensation coverage to include COVID-19 in some manner. In June 2020, legislation was enacted in Illinois that creates a presumption of workers’ compensation coverage for first responders and front-line workers, which presumption is rebuttable. However, it is less clear whether other types of workers can also receive workers’ compensation coverage if they contract COVID-19 on the job. For example, are maintenance personnel or door staff who work in a community association eligible for workers’ compensation coverage if they contract COVID-19? At the time of writing this article, the author is unaware of any such claims. Certainly, there is an issue regarding whether the employee contracted COVID-19 while on the job or elsewhere.
Not directly related to COVID-19, but certainly related to our present cultural moment, the riots and looting that occurred over the summer in connection with social justice protests will impact the insurance industry. Those businesses that sustained property damage will likely be filing claims. Perhaps only a coincidence, and not a result of the riots and looting, Ms. Fitts indicated that she has recently seen an increase in community associations adding terrorism coverage back into their policies at renewal.
42 | COMMON INTEREST® • Winter 2020 • A Publication of CAI-Illinois Chapter
The question on the minds of many boards will be, “how will any of what is going on today impact premiums?” It is very likely that the volatility of our world, domestically and abroad, will result in a rise in premiums. One way to deal with rising premiums is to increase deductibles, suggests Ms. Fitts, and to include that deductible in the budget. That way, if the deductible is ever needed, “it is already built into their business plan,” states Ms. Fitts. Increasing and budgeting for a deductible may be a better option than decreasing policy coverage.
Although we are in the midst of the novel coronavirus pandemic, there are other societal and cultural forces stressing the insurance industry. One factor cannot be looked at in a vacuum. Multiple factors may play a role in changes affecting a wide range of policy holders and carriers. What does that mean? It means that situations like natural disasters (such hurricanes on the Gulf and east coasts and the wildfires on the west coast) and social unrest (such as the rioting and looting), which exist concurrently with the pandemic, will impact the insurance industry along with the pandemic. It may not be clear which factor is the most influential for any given change.
As you can see, the “new normal” for the insurance industry is looking to be the same as the “old normal.” That is to say, the novel coronavirus pandemic will be just one factor that the insurance industry considers as it continues to closely analyze the events and situations of our present moment when evaluating coverage, exclusions, premiums, etc. Overall, a community association’s conversation with its insurance professional will largely cover the same issues as before the novel coronavirus pandemic arrived on our global doorstep, i.e. what types of insurance make the most sense for the association today and in the future, what types of insurance are required by law or governing documents, and what premiums and deductibles are available.
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