I know your emails are being bombarded about the CoronaVirus from every company that has your email address, but my hope is that this email will help answer many questions that are on the minds of business owners and people that have rental properties.
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This situation is truly unprecedented and everyone, including Insurance Companies are looking at this situation and how to best proceed. I know that this time can seem scary, uncertain and stressful, especially for those of you that rely on the public to operate your business or rely on rental income from an investment property.
Steps are being taken as I write this email in Congress to address these issues. It will take some time for Insurance Companies to possibly put into place certain endorsements/wordings that will provide coverage in the future. I know that certain forms just became available in February 2020, by ISO(Insurance Service Organization- they are the Organization that writes all the Insurance policy forms). No insurance company that I am aware of has actually adopted these forms yet, but I’m sure they will in the near future.
What does that mean for you?
First, in order to receive ‘loss of business income’, you MUST have a property policy- whether that is a BOP(Business Owner Policy) or a Package policy- one that combines General Liability & Property together, or a stand alone Property policy. Under all property policies, ‘Bacteria & Viruses’ are EXCLUDED causes of loss. Now, IF the government mandates a shut down as we are seeing in some states and for certain types of businesses, there ‘could be’ some coverage for loss of business income. I say ‘could be’ because again, this is unprecedented and Insurance Companies have never been faced with this type of pandemic and thus is not something that they have ever paid a claim on before. I’m sure the lawyers for every insurance company are currently looking at their policy forms to see if a Government shut down would take priority over the exclusion of bacteria and viruses and how they can provide coverage for their customers. We will have to wait and see how this plays out.
My suggestion is to keep track of the days you have had a loss of income, how many employees you had to keep paying income for or if you lost employees due to this crisis. If you were forced to shut down your business due to State or Federal mandate, keep track of all these dates. If the insurance companies will allow claims to be turned in after a few months(enough time to determine if coverage will be provided), then we can proceed with turning in claims if you need/want.
I know a lot of you own rental properties(short term condos, vacation rentals, etc). Under a homeowners or fire policy, there MUST be a direct physical loss to your property before Loss of Rents will apply. Direct physical loss is fire, water damage, lightning, hail, hurricane, etc. Unfortunately, no carriers are offering coverage for loss of income due to the virus. Now, again, this might be something that they add to the policies in the future, but for now, this is not a covered claim. I’m truly sorry for those of you that rely on rental income from your properties. Hopefully, this is something that will only last for a short time and your properties will be back to full occupancy soon.
I would also suggest though that you keep track of any bookings that have been cancelled due to the virus- keep track of dates, income lost and names of the bookings. That way, if something does come to fruition in the future, we can see if there might be some coverage.
What Congress is doing
On Saturday morning, the U.S. House of Representatives passed H.R. 6201, the Families First Coronavirus Response Act, by an overwhelming bipartisan vote. The legislation guarantees free coronavirus testing, establishes paid leave, enhances unemployment insurance, expands food security initiatives and increases federal Medicaid funding. President Trump pushed for a payroll tax cut to be included, but bipartisan opposition on Capitol Hill kept that out of the bill. That proposal may be revisited in follow-up legislation to address the crisis.
The legislation requires businesses under 500 employees to provide 12 weeks of job-protected family and medical leave and two weeks of paid sick leave for coronavirus related reasons. It is important to note that while these mandates are only for businesses with fewer than 500 employees, companies with fewer than 50 employees can request a hardship exemption from these provisions.
The legislation also provides a refundable tax credit equal to 100% of both qualified paid sick and paid family leave by an employer for each calendar quarter. This tax credit can be applied against the employer portion of Social Security taxes. This credit applies to amounts paid with respect to employees who must self-isolate, obtain a diagnosis or comply with a self-isolate recommendation. For employees who are on leave to care for a family member with coronavirus or for a child whose school has been cancelled, a lesser credit applies.
The situation is fluid as there are reports that the House may have to act again on the legislation to make “technical corrections” and, of course, the U.S. Senate could still make changes to the bill. It is expected the above provisions to become law in the next few days. Additionally, Congress is expected to consider additional legislation in an attempt to ameliorate some of the economic impact of the crisis.
Culley Insurance Group will continue to monitor these changes and keep you updated on how this will affect your Insurance coverage.
We are here for you and happy to answer any questions you might have.