As the COVID-19 virus spreads throughout the U.S., one question that is top of mind for all tribal organizations is: Do we have any form of insurance that might help us weather this severe interruption?
For more than 100 years, business interruption coverage has been an important part of most commercial coverage insurance programs for many organizations. This specialized form of “first-party” insurance is designed to cover the loss of income arising from the inability to continue the normal operations and functions of a company due to a disaster.
Traditionally, some type of physical damage to the organizations’ property, such as a fire or some type of weather-related event, was required to trigger business interruption coverage. The physical damage requirement was further limited to covered locations and covered perils. Intuitive covered perils that cause physical property damage include hurricanes, fires, explosions, etc. In the COVID-19 era, finding a covered peril for your property is the hard part.
Why it is important for tribal businesses
Any organization’s executives are responsible for managing risk, and by definition alone, business interruption is a very concerning risk.
Tribal gaming enterprises play a vital role in providing for the general welfare of Tribes and their members. With Indian Gaming revenue now north of $30 billion dollars annually, tribal nations use the profits from this revenue to aid in tribal economic development, the funding of government operations, construction of homes within housing authorities, treatment and care at hospitals, and even large donations to non-tribal charitable organizations in the surrounding communities. Most would agree that since the Indian Gaming Regulatory Act was passed in 1988, the social and economic impact of Indian Gaming has become nothing short of transformative for most tribal nations.
What is happening today
As we have heard from many of our tribal gaming CFO clients, the greatest concern with COVID-19 is the length in which complete closure is going to be a disruption to business activities, in particular daily operating activities. Supply chain disruptions, mandatory or voluntary quarantines, restricted travel and “social distancing” measures have left the vast majority of tribal casinos in complete shutdown, solely to curb the spread of the COVID-19 coronavirus.
These disruptions have put a halt to all revenues and profits for tribal gaming. While many casinos have done their best to continue paying their staff during the closure, the uncertainty in when the doors will open is now leading to the need to reduce or even completely lay off staff in some cases. The impact that tribal casino operators are feeling will also be felt upstream and downstream as suppliers, vendors, contractors, service providers and customers/clients experience complete disruption and the inevitable financial losses.
As mentioned above, traditional business interruption coverage is triggered by some form of physical damage. In the context of COVID-19, the requirement for physical damage causes problems of proof for many policyholders.
A generic application of this concept would require that the COVID-19 virus physically damage or contaminate the property of the insured, or the insured’s customer or supplier in the case of Contingent Business Interruption coverage. If direct physical loss or damage is required to trigger coverage, insurance adjusters and the U.S. courts generally deny coverage if it is not visually or mechanically apparent.
There are always exceptions
What if your business location has had visitors or employees affected by COVID-19? Has your property been damaged? That challenge was established when a number of Tribes filed suit against their insurers, claiming that as a result of this pandemic and infection, the Tribes sustained direct physical loss or damage and will continue to sustain direct physical loss or damage covered by the policies, including but not limited to business interruption, extra expense, interruption by civil authority, limitations on ingress and egress, and expenses to reduce loss. As a direct result of this pandemic and infection, the Tribe’s property has been damaged, as described above, and cannot be used for its intended purpose.
Some insurance policies include coverage for losses arising from civil authority orders that restrict or prohibit access to property. These policies may or may not require a physical loss. Other specialized policies common in the healthcare or hospitality industries include coverage for “communicable and infectious diseases” as a designated peril or trigger.
Another trigger in some policies may include “loss of attraction.” In the case of COVID-19, a loss of attraction could be related to the discovery of contamination in a venue and ongoing anxiety from patrons as to whether it is safe to return.
COVID-19 will not trigger coverage for most
The trigger for coverage in most policies is often limited to local government orders rather than a general announcement by the World Health Organization of a worldwide pandemic. Additionally, most businesses are suspending operations based on voluntary policies of social distancing and other mitigating efforts being made to contain or minimize the spread of the virus.
It should also be noted that many policies, and insurance forms, specifically exclude coverage for losses caused by quarantinable disease, or by “contaminants” defined with sufficient breadth to include viruses such as COVID-19.
But desperate times call for decisive measures — and now some state governments are calling for insurance companies to consider and pay claims despite the exclusions.
What you should do
For most policyholders, the prospect of finding coverage to address losses caused due to the COVID-19 virus appears to be somewhat limited. However, the bottom line for all organizations should be to:
- Obtain your policies
- Read them carefully
- Confirm that there are no specifically excluded perils
- Look for any coverages that may be applicable to financial losses caused by the COVID-19 outbreak.
- Start to capture, gather and analyze financial and other business records to identify and quantify the interruption to your business, in preparation for the potential to pursue claims against insurance companies or governmental entities despite exclusions.
If you need help
No business is immune to disruptions, whether natural disasters, industrial catastrophes or pandemics. Getting past the rebuilding and business reestablishment part is hard enough by itself. In addition, having to maneuver through the insurance claim preparation and settlement process to obtain your fair settlement can be a serious challenge.
If you need help preparing business interruption, property damage or fidelity claims, contact Wipfli’s tribal specialist team. We will work solely on providing claim preparation advice, or we can take you through the entire process, from identification of loss exposure through actual claim quantification and preparation, as well as final settlement negotiations.
Make sure to visit our COVID-19 resource center for further help navigating this crisis.