Reed Smith Client Alerts

The recent outbreak of a novel coronavirus has created some apprehension, confusion, and potential complications for businesses across the United States and around the world. Whether they have operations and employees in China or rely on Chinese companies as customers or in their supply chains, different types of businesses may incur additional costs or experience some sort of business interruption or other loss as a result of the viral outbreak. In certain circumstances, those costs and losses may be covered by commercial insurance, particularly business interruption or contingent business interruption coverage.

The novel coronavirus under a commercial spotlight

"Coronaviruses," according to the World Health Organization (WHO) "are a large family of viruses that cause illnesses ranging from the common cold to more severe diseases..."As explained by the WHO, and as widely reported in the media, a "new strain" of a novel coronavirus recently has been identified.

Accordingly, on January 31, 2020, U.S. Secretary of Health and Human Services Alex M. Azar II made a formal determination "that a public health emergency exists and has existed since January 27, 2020, nationwide." The New York Times reports that, as of February 5, 2020, "12 cases of coronavirus had been confirmed in six [U.S.] states, and officials were awaiting test results on dozens more possible cases."

As a result of the outbreak, the operations of a number of businesses have been affected. Chinese manufacturers and related businesses have been hit by government-mandated factory shutdowns. The ripple effects from the containment measures are likely to impact supply chains and prompt the Chinese government to contemplate lowering China’s annual economic growth target. As The Washington Post reports, "[t]he battle to contain the ... coronavirus threatens to cut off U.S. companies from parts and materials they need to produce iPhones, automobiles and appliances and drugs to treat medical conditions including Alzheimer’s disease, high blood pressure and malaria."