In one of our previous posts, we addressed policies and endorsements that might provide coverage for COVID-19 business losses. This post focuses specifically on pandemic event coverage contained in a trade name restoration policy.
Trade Name Restoration (“TNR”) Coverage
Trade name restoration coverage (also referred to as “TNR”) is a specialized type of business insurance policy designed to protect against damage to a company’s reputation and good name in the event of a catastrophic or damaging event. In 1997, Professional Liability Insurance Services, Inc. (“PLIS”) developed one of the most prevalent TNR coverage forms.
The form – which is marketed and sold by Lloyd’s of London – covers business interruption, extra expense, and other “crisis management” damages a business might suffer. One of the main coverages available under the TNR form protects a business in case of a foodborne illness outbreak. And so as a result, bars, restaurants, and other food service businesses are likely to purchase this policy. Cleverly, PLIS touts this policy as a way a business can “vaccinate [its] bottom line.”
Pandemic Event Endorsement
Since COVID-19 has not been publicly linked to foodborne illness outbreak, that portion of the TNR policy form would not apply. TNR also contains a “Pandemic Event Endorsement,” which has recently been spotlighted in the news.
A movie theater chain in the Houston area recently sued its insurer, Lloyd’s of London, seeking a declaration that it had pandemic loss coverage under its Trade Name Restoration policy. The business alleged it was required to close all of its Texas locations as a result of Texas Governor Greg Abbott’s executive order banning public gatherings of more than 10 people at non-essential businesses. The theater purchased its Trade Name Restoration policy with Lloyd’s, and the policy contained a Pandemic Event Endorsement.
What is a “Pandemic Event” that triggers coverage?
Under the Pandemic Event Endorsement, a “Pandemic Event” is defined to mean either (1) the actual presence of an Infected Person within a Covered Location; or (2) the announcement by a Public Health Authority that a specific Covered Location is being closed as a result of an Epidemic declared by the [Centers for Disease Control and Prevention] or [World Health Organization].”
The movie theater chain argued that part (2) of the definition of a pandemic event applied to its business. That is, it did not assert that an “infected person” – someone who, presumably, had tested positive for COVID-19 – had been present at one of its location. Instead, it argued its locations were “closed as a result of an Epidemic.”
Does COVID-19 Qualify As An “Epidemic?”
In order to show a business was “closed as a result of an Epidemic,” a covered business must show an Epidemic occurred. The Pandemic Event Endorsement defines an “Epidemic” as an “occurrence of a Covered Disease” that
- rapidly and unexpectedly becomes widely distributed and affects or attacks persons simultaneously throughout a geographic location, region, territory, country, continent, or globally as defined by the WHO or the CDC; and
- would impair normal physical function of any part, organ, or system (or a combination thereof) of the body that manifests by a characteristic set of signs and symptoms.
COVID-19 satisfies both criteria (a) and (b), as the disease has become widespread and sadly significantly impaired the organ systems of those who contracted it. Where the dispute lies here – and where Lloyd’s of London is refusing coverage – turns on whether COVID-19 is a “Covered Disease” under the policy.
Is COVID-19 a “Covered Disease?”
The million-dollar question is whether COVID-19 constitutes a “Covered Disease” under the Pandemic Event Endorsement within a Trade Name Restoration policy. The policy states that a “Covered Disease” is “limited to the following pathogens, their mutations, or variations,” and lists more than twenty specific diseases. One disease listed is “Severe Acute Respiratory Syndrome-associated Coronavirus (SARS-CoV) disease.”
Lloyd’s declined to cover the movie theater’s claim because “it is not a named disease on that endorsement.” But, as the movie theater pointed out, the policy both lists “SARS-CoV disease” as a Covered Disease and specifically includes any “mutations or variations” of one of the enumerated diseases to constitute a “Covered Disease.” The movie theater has argued that another common name for COVID-19 is “SARS-CoV-2,” and is thus a “variation and/or mutation of SARS-CoV” that would trigger coverage.
The movie theater’s lawsuit is pending, and still in its early stages.
No Requirement of Direct Physical Loss
One of the most significant differences between the Pandemic Event Endorsement found in the TNR policy, and other potentially applicable civil authority and business interruption coverage, is it does not require “direct physical loss” at the covered property or some other property. Rather, the showing of (1) a WHO or CDC-sanctioned “Epidemic,” caused by a (2) Covered Disease, (3) leading to damage at a business, would seem to suffice for coverage.
Pandemic Insurance Coverage Lawyers
Hundreds of thousands of businesses across Texas and the United States have lost revenue and/or been shut down altogether due to the pandemic. If your business has been directly impacted by COVID-19, it is important to review your insurance policies and document coronavirus-related business losses and expenses.
At Raizner Slania, our focus is holding insurance carriers accountable when they wrongly delay, deny, or underpay valid claims for coverage. If you or someone you know has a question or concern relating to business interruption insurance coverage and the coronavirus contact us today to learn more.