When global health emergencies erupt, such as this year’s coronavirus outbreak, the impacts to businesses spread beyond obvious health concerns. Companies often ask whether there is any commercial insurance that can provide coverage for losses arising from these situations.
Here are our views about how some common forms of coverage purchased by multinational companies in China may apply there, given the current situation.
Local Business Interruption Coverage
Business income (or interruption) insurance covers losses caused by a slowing down or stoppage of operations. However, the trigger for this type of policy is some form of physical damage to the business. By this definition, an infectious disease is not a “covered peril,” so coverage does not apply.
There are some extension clauses for infectious disease in the local Chinese market, but the wording may not be suitable or applicable for the situation.
Local General Liability Coverage
While typical coverage in China does not exclude infectious diseases, the insured would have to be found legally liable for losses in order for the policy to respond. If the court found the insured not guilty, the insurer would not cover legal expenses.
Local Workers’ Compensation and Employers Liability Coverage
First, infectious disease is a standard exclusion in most employers liability policies. Second, infectious disease is not considered an accidental or occupational disease. However, it may be possible to add an extension clause to trigger workers’ compensation coverage if an employee’s injury or illness is certified as work-related, which would be determined by local human resources and social security authorities.
In China, on January 23, the government announced that any Chinese personnel working in medical facilities or carrying out any work related to coronavirus and any individual who dies due to coronavirus should qualify for the statutory workers’ compensation.
Foreign Voluntary Workers’ Compensation and Repatriation Coverage
Third-country nationals who have traveled to or who are on temporary assignment in China and contract coronavirus while under the scope of their employment would receive coverage per the statutory requirement of their country or state of hire, via their foreign voluntary workers’ compensation (FVWC) or endorsed domestic workers’ compensation program.
Coverage for repatriation expense is also available as part of a FVWC policy, but only if an employee contracts the virus, not simply as part of a precautionary evacuation. Additionally, coverage is generally included for endemic diseases (infection diseases generally recognized as a public health hazard and restricted to a locality outside the U.S.), but excluded for pandemic diseases (an endemic affecting multiple or all continents).
Business Travel Coverage
The Chinese government announced a suspension of all travel within mainland China on January 26, 2020. Most travel insurance carriers started excluding coronavirus-related coverage on policies issued after that date.
Organizations should check their business travel policies to see whether they exclude infectious disease, especially as it applies to flight cancellations/delays, medical reimbursement, medical evacuation and repatriation.
Local Employee Benefits Coverage
As part of their benefits program, most multinational companies purchase risk and medical insurance. If the company has purchased and confirmed these coverages, remind employees about the coverage they have. Term life also can be purchased to cover death due to illness, including infectious diseases like novel coronavirus.
Most insurers in China have announced that they have removed limitations on the types of drugs, levels of hospitals, and all deductibles and waiting periods to support their insured members who are infected (or who are suspected of being infected) and require extensive medical treatment.
Business Continuity Planning for Public Health Issues
Most companies have a business continuity plan (BCP). However, those plans are often focused on supply chain issues, major accidents or natural disasters. Business interruption due to public health issues are typically neglected.
Novel coronavirus isn’t the first and won’t be the last public health crisis the world faces. Therefore, consider adding the following components to your BCP plan:
- Forming a health crisis situation response team
- Establishing communication platforms/protocols for management team, employees, relevant authorities, clients, suppliers and business partners
- Planning for succession
- Establishing alternative working arrangements (i.e., remote locations)
- Arranging care for infected employees
- Establishing travel policies
Global Reach. Local Knowledge. Working for You.
As one of the original U.S. founding members of the Worldwide Broker Network (WBN), Hylant partners with teams of service-minded experts on the ground in 100 countries—including China—and 500 cities around the globe. This local knowledge is especially relevant and helpful to our clients during emergencies such as the current health crisis.
If you have questions about how your business insurance will react outside of the U.S., contact your local Hylant office for a consultation. Visit the Hylant Coronavirus Resource Center at www.hylantcoronavirusinfo.com to access a wide variety of materials designed to help you navigate these unprecedented times.
Thank you to our partners at Worldwide Insurance Services Enterprise (WISE) and Chang Cheng Insurance Brokers (CCIB) in China for their insights into these important business issues. The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.