Hartford Business Journal

24 Hartford Business Journal • June 1, 2020 • www.HartfordBusiness.com OPINION & COMMENTARY EXPERTS CORNER Connecting while apart By Scott Willett L et's cut through all of the clutter. "Social distancing" is about mini- mizing and avoiding physical contact with others, and it will reduce the spread of COVID-19 and save lives. While maintaining physical dis- tance can keep more people from contracting COVID-19, "extreme social distancing" in the absence of "virtual connecting" can put the overall health, wellbeing, and pro- ductivity of people at risk, impact- ing organizational effectiveness and performance. Virtual connecting is not just about the technology we leverage to connect re- motely. Remote working is noth- ing new, and has been around for a long time. Vir- tual connecting is also, and more importantly, how we intentionally connect with others at a human level, acknowledging, empathizing with, and delivering the essentials people need to be produc- tive and fulfilled. How people feel during and after a virtual meeting is paramount. Was there a genuine invitation and space provided to truly connect and share? One of the biggest drivers of per- formance at work is organizational climate. Simply defined, organiza- tional climate is "how it feels to work where I work," and while the "where" and "how" people work is evolving, climate will remain a primary driver of engagement and productivity. Why? It comes back to neurosci- ence and how our brains work. We feel, think and do. What we feel impacts what we think, and what we think impacts what we do. EDITOR'S TAKE Federal gov't must fill business interruption insurance gap T wo of Hartford's largest employers — The Hartford and Travelers Cos. — are facing a barrage of lawsuits from policyholders, including popular restaurants and other small employers, who say their business interruption insurance claims filed in the wake of COVID-19 government shutdowns were wrongly denied. In response, at least eight states — not includ- ing Connecticut — are considering bills that would force insurers to cover coronavirus-related busi- ness interruptions, even if the policies specifically excluded pandemics from the coverage. At stake is the insurance in- dustry's future solvency and potentially thousands of jobs in Hartford. The American Property Casualty Insurance Association (APCIA) estimates that coronavirus claims from small businesses alone (with fewer than 100 workers) could total up to $431 billion a month. Insurers can't withstand that type of claims activity. In fact, insurance ratings agency A.M. Best recently said attempts to retroactively require insur- ers to cover COVID-19-related business interruption losses "would have grave impacts for the industry." Such legislation is wrong-minded and most likely unconstitutional, and attempts to pass it should be stopped in their tracks. We don't need to artificially create another financial crisis — by upending the insurance industry — when plenty of economic uncertainty already exists. Instead, the situation requires a federal gov- ernment solution. Just as Congress created a public-private terrorism risk insurance program in the wake of the Sept. 11 terrorist attacks, fed- eral lawmakers should establish a pandemic risk insurance program. Such legislation is already being considered as pandemics — according to the APCIA — are largely uninsurable events because they are too widespread, severe and unpredictable to under- write, meaning policies would be unaffordable, particularly to small businesses. Meantime, insurers have thrown their support behind creation of a federal Business Continuity Protection Program that would provide revenue replacement assistance for payroll, employee ben- efits, and operating expenses following a presi- dential viral emergency declaration. That may not help companies right now, but there are other federal aid programs — includ- ing the Payroll Protection Program — to help get employers through the current crisis. That being said, the economic harm small businesses have felt in recent months can't be understated and many employers likely won't recover from it. Words matter In its most basic form, business interruption in- surance covers financial losses caused by physical damage to a commercial property, such as a fire. Since 2006, following the SARS outbreak, most business interruption policies began to exclude viruses, bacteria and contaminations, according to APCIA. Government-ordered business shutdowns to stop the spread of COVID-19 have caused widespread economic harm, leading some companies with busi- ness interruption insurance to assume they are cov- ered. Many are finding they aren't. Some, including restaurants, law firms, retailers and small physician practices, are responding by suing their insurer for wrongly denying their claims. Others are lobbying their state legislatures and even President Trump to force insurers to cover COVID-19-related business interruptions. The issue is not black and white because not all business interruption insurance policies are writ- ten the same. Many clearly exclude pandemic events, while others leave room for interpretation, said Wethersfield attorney Michael McCormack, who is a shareholder at law firm O'Sullivan McCor- mack Jensen & Bliss PC. "It all comes down to what the language in a par- ticular policy says," said McCormack, who repre- sents business interruption insurance policyhold- ers. "Some policies can differ by just a few words and those few words can make a big difference." One gray area is insurance policies that don't have a pandemic exclusion and promise to cover physical damage or physical loss. The definition of "physical loss" isn't 100% clear, McCormack said. "If a business has lost the use of its property as a result of a government shutdown, does that constitute physical loss?" McCormack asked. The courts may have to sort that question out, but it's a separate issue from policies that clearly exclude pandemics. States ought not try to change the terms of those contracts after the fact. And it's an issue that has the attention of insur- ance regulators. "Business interruption is a huge issue and a po- tential liability if contracts are changed retroac- tively," said Connecticut Insurance Commissioner Andrew Mais. "I'm not sure there is enough capi- tal in the insurance industry to cover it for more Greg Bordonaro, Editor Scott Willett

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