On COVID-19 Insurance Coverages: We Haven’t Seen Anything Yet

No doubt you’ve seen the Farmers Insurance ads claiming, “We know a thing or two because we’ve seen a thing or two.” Most describe insurance claims paid on foreseeable calamities caused by familiar animals — bears, deer, moose, and rodents. They’re out there doing the things these lovable creatures usually do. Swimming in the backyard pool, dancing on a car hood, stealing engagement rings.

Accidents happen. We’ve all been there.

No one in the insurance industry has seen a thing or two or knows a thing or two about the misbegotten SARS-CoV-2, the highly transmissible virus that can either cause agonizing death, pass through its victims with nary a trace, or inflict symptoms somewhere in between.

COVID-19 leaves in its wake billions of dollars in arguably compensable losses, many of which are arguably covered by an insurance policy. The world today is still at the “arguably” stage of sorting out financial responsibility for COVID-19 losses. While hundreds of insurance coverage lawsuits have been filed, those cases are in their early stages, and very little is definitively known about where the COVID-19 buck will ultimately stop.

We’re about to learn a thing or two about insurance coverages in the following areas.

Business Interruptions

Many businesses suffered catastrophic losses due to government shutdown orders. Insurance companies have, for the most part, denied coverage under business interruption policies, citing language that requires “direct physical loss of or damage to property” as a pre-condition to coverage. A federal court in California recently accepted this argument, ruling that Governor Gavin Newsom’s “Safer at Home” order did not cause physical loss or damage to property. Mudpie Inc. v. Travelers Casualty Ins. Co., No. 20-cv-03213 (N.D. Calif., Sept. 14, 2020).

On the other hand, a federal court in Missouri denied a motion to dismiss a lawsuit demanding coverage for business interruption losses because the presence of COVID-19 on business premises rendered the property unsafe and unusable — thus creating a “direct physical loss” within the meaning of the policy. Studio 417, Inc. v. Cincinnati Ins. Co., No. 20-cv-03127 (W.D. Mo. Aug. 12, 2020).

Future court rulings promise to add clarity to this area of insurance coverage.

Insurance Agency Errors and Omissions

Some in the insurance community are worried that, if they are successful in turning back business interruption claims, then insureds will assert errors and omissions claims against insurance agents. The theory here is that insurance agents owed a duty to their insureds to inform them of the limits of their coverages and to offer them business interruption policies that would have covered losses due to government shutdown orders. One such lawsuit was recently dismissed by a federal court in Texas, but there are others still working their way through the judicial system.

General Liability

This is a fertile source of legal liability and insurance company exposure. General liability insurance policies, also known as commercial liability insurance, protects businesses against claims for damages to others caused by their services, operations, or employees. In the context of COVID-19, general liability policies will kick in if a business’s customers contract COVID-19 due to the policyholder’s negligence.

Ongoing lawsuits by cruise line passengers and employees who died from COVID-19 allegedly contracted on their business premises implicate coverage provided by general liability policies.

Legislative enactments in several states give legal immunity to businesses for these sorts of claims. A push by Republicans in the U.S. Senate to immunize businesses nationwide has yet to bear fruit.

Directors and Officers Liability

Directors and officers liability insurance protects company leadership from liability claims arising when shareholder values slip or companies suffer losses due to alleged mismanagement. COVID-19 promises to be a rich source of such claims. Lawsuits have already been filed alleging D&O liability for downplaying the business impact of COVID-19, for falsely reporting the development of a COVID-19 vaccine, and for implementing inadequate health and safety measures to prevent the spread of the disease.

Other sources of D&O liability include enforcement actions from the Security and Exchange Commission, antitrust investigations, state and federal investigations into COVID-related price-gouging, and private consumer protection actions raising a host of alleged unfair business practices during the COVID-19 pandemic. Suits by students against universities, any sort of business mismanagement claim, even wage and hour lawsuits, all implicate coverages provided by D&O policies.

Workers’ Compensation

The availability of workers’ compensation insurance for COVID-19 varies from state to state, a situation made more complicated by recent state government interventions that mandate workers’ compensation benefits for COVID-19 cases suffered by some groups of workers.

Some states exclude from workers’ compensation “ordinary diseases” — a label that arguably fits COVID-19 — while others define “injury” in such a way that COVID-19 does not likely qualify for benefits. And in those states in which COVID-19 might be covered, the employee would have to prove that the disease was contracted during the course of his or her employment.

In jurisdictions where workers’ compensation insurance is available, the impact of COVID-19 is not trivial. Data recently analyzed by the California Workers’ Compensation Institute indicated that COVID-19 accounts for over 10 percent of workers’ compensation claims in that state.


It’s only been seven months since the United States first began widespread business shutdowns and social distancing measures — far too early to know the ultimate impact of the pandemic on business and personal affairs. And it’s fair to predict that the legal system will still be working through the scope of insurance coverages for COVID-19 losses many years after the pandemic has passed. Someday we’ll have seen a thing or two about COVID-19 and we’ll know a thing or two about COVID-19. But it won’t be someday soon.