Hartford Business Journal

22 Hartford Business Journal • April 6, 2020 • www.HartfordBusiness.com OPINION & COMMENTARY EDITOR'S TAKE Storm clouds hover over CT economy N ow that many companies have settled into a new normal, mainly working from home or not working at all, the question on everyone's mind is how long will the Connecticut economy be under literal and figurative quarantine, and what will be the long-term impact. Surprisingly, there is optimism among some local economists, bankers and economic-development experts who say that Connecticut's economy will recover relatively quickly — in a matter of months — once the state's "Stay Home, Stay Safe" mandate is lifted. They are cau- tiously optimis- tic that the vari- ous state and federal stimulus packages, along with a healthy banking sector coming into the crisis, will help blunt the long-term economic impact of the coronavirus shutdown. I'm not totally buying it. Frankly, I don't think there is any realistic way to forecast how quickly the economy will bounce back, simply because the modern world hasn't experienced anything like this, where entire industries are shut down, or nearly shut down, for several months or longer. I applaud the steps state and federal governments have taken to inject much-needed capital into the economy — for businesses and indi- viduals — but I'm not sure it will be enough to stem the economic tidal wave that has hit companies of all sizes, particularly small employers. Of course, a lot will depend on how long COVID-19 remains a pub- lic-health threat in the state, but it seems to me, the earliest things will start to get back to "normal" is June 1, and that could be optimistic. There's some meaningful data out there to back up my concerns. For example, according to Cambridge-based data-science firm StratoDem Analytics, Connecticut's economy is projected to contract by $15 billion during the second quar- ter due to coronavirus disruption. Hartford County's economy is pro- jected to experience an 18.3% contrac- tion in the second quarter, equivalent to a $3.9-billion economic loss, Strato- Dem Analytics data shows. Only Fairfield County, the epi- center of the state's pandemic, is expected to fare worse with a $5.3 billion, or 24.2% GDP contraction. "Overall, Connecticut will likely be one of the harder-hit states in this recession, across the board," said James Chung, a partner at Strato- Dem Analytics. "Not as hard hit as Michigan or northern Indiana, given their greater level of dependence on cyclical manufacturing, and not as hard hit as tourism-dominated counties, but this recession is go- ing to be deeply painful for a lot of households and organizations across all of Connecticut." Meantime, a recent online survey conducted by the Department of Economic and Community Devel- opment and AdvanceCT found that nearly 60% of Connecticut busi- nesses have reduced their capac- ity or closed due to the ongoing pandemic, and about 82% expect to see a revenue decrease. None of that data points to a quick recovery. What also concerns me is that Connecticut entered 2020 in a weaker economic position than the rest of the country, having shed 3,300 jobs in 2019, while personal income grew at a slower pace (3.2%) than all but two states. I don't mean to be a pessimist, but it's important that businesses accurately project where Connecti- cut's economy is headed. My best recommendation is to plan and forecast conservatively and aggressively go after state and federal stimulus dollars. Small businesses that get a piece of the action may have the best shot of surviving during these uncertain times. Greg Bordonaro, Editor EXPERTS CORNER Will your insurance cover coronavirus- related losses, lawsuits? By Michael McCormack T he coronavirus pandemic has had a significant financial impact on businesses in all industries that is likely to continue for an uncertain period of time. Many businesses have closed or limited their operations due to the virus and restrictions imposed by governmental authorities. It is also inevitable that there will be securities liability lawsuits filed against companies for losses alleged to have been suffered by a third party due to misleading or inaccu- rate financial reporting, or alleged improper management or decisions made by corporate officers or direc- tors, as well as liability claims against health- care providers and businesses for negligence or other wrongful acts that alleg- edly cause bodily injury or prop- erty damage. Businesses must understand their insurance portfolio to determine whether they are protected for such claims or losses. Some insurance policies that may protect a business from coronavi- rus-linked litigation include: Business interruption insur- ance: Commercial policies generally include business interruption cover- age that indemnifies a business for losses sustained due to an interrup- tion in operations. Coverage under such policies could include civil authority coverage, which may protect a business in the event of an interruption caused by govern- ment orders that impair or prohibit access to a company's property. Business interruption policies pro- tect the insured from losses caused by an interruption to business of suppli- ers or distributors in its supply chain. Business interruption cover- age generally requires that there be physical loss or damage to the insured or supplier's property. Additionally, these types of policies may contain coverage exclusions for viruses, although some states have begun to address this issue. As an example, the New Jersey legislature introduced legislation on March 16, to force insurers to include coverage for business interruption due to the coronavirus pandemic. Event cancellation insurance: Numerous events have been can- celled due to coronavirus fears, im- pacting hospitality, travel and retail businesses. Event cancellation insurance poli- cies provide coverage for losses aris- ing from events that are cancelled due to circumstances outside of the insured's control, including cancel- lations due to government order. Coverage may apply for cancella- tion of an event, as well as for events that started but did not finish, and events that continued but not at the level of attendance expected due to the coronavirus. Coverage may also exist for events that are postponed or relocated. Directors and officers insurance: D&O insurance policies protect of- ficers, directors and businesses from liability for wrongful acts, includ- ing various breaches of duties, that cause economic loss to a third party. These policies apply to shareholder lawsuits against corporations. There likely will be numerous shareholder and securities lawsuits filed as a result of the stock market slide due to concerns over the coro- navirus. Commercial general liability and errors and omissions coverage: Commercial general liability insur- ance policies protect businesses against losses for claims filed for bodily injury or property damage caused by an accident. Errors and omissions insurance generally covers professionals for claims alleging negligence in the pro- vision of professional services, includ- ing health care and convalescent care. Claims filed against a nursing home, hospital or medical professional for coronavirus-related injuries may trig- ger coverage under these policies. Michael McCormack is an attorney and shareholder at Wethersfield- based law firm O'Sullivan McCormack Jensen & Bliss PC. Michael McCormack

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