By Robin Manougian, Vice President
The early days of COVID-19 seemed like a long snow day. Businesses shut down and restaurants closed. Were it not for the specter of the unseen threat around us, the empty grocery shelves might have signaled the familiar forecast for snow. But there was no snow, just the eerie quiet, the unease of unrelenting news, and the recounting with friends the last “normal” day we had, much like one might remember where he was on 9/11.
March and April remained cold in many areas, and the lingering chill delayed thoughts of pool season – unless of course you manage or insure a community association. As the early spring days passed, and Covid surged on, canceling school and life as we knew it, community associations with swimming pools, open only a few treasured months a year in many locales, were faced with making tough decisions about opening. For many areas, opening on time wasn’t a choice. State and local jurisdictions using a 1-2-3 phased approach kept pools and gyms closed. Phase 2, which some areas remained in as of the end of August, allowed pool openings, but with capacity restrictions calculated in Maryland, for example, by dividing the square footage surface area of a pool by 36 to ensure six feet of separation between pool patrons.
For those that chose to open, the cleaning and use requirements were rigid, preceded with an array of questions about liability, possible claims scenarios, and whether insurance would protect an association if a member or visitor should claim to have picked up the virus at the community’s facilities.
At one time uncharted territory, insurance professionals have become proficient in ticking off lists of suggested do’s and don’ts when it comes to opening pools and fitness rooms and any place where surfaces could expose someone to the virus. The prospect of cleaning means added expense and manpower that many insureds have found difficult to maintain without any certainty of preventing transmission. Agents and attorneys alike have relayed to clients directly or through countless webinars, protocols to protect their members and the associations from possible suits, underlining that the optics of those efforts are critical.
Recommendations such as cleaning amenities and restrooms several times a day with approved cleaning products (and asking patrons to leave during cleanings to ensure thoroughness), hiring a separate individual to enforce COVID-19 guidelines, storing pool furniture for the year and asking members to bring their own chairs to eliminate at least one high-touch surface, installing hand sanitizer stations and signage, requiring masks at all times unless swimming, removing pool toys and kickboards, disallowing guests, disallowing alcohol use, posting and updating the association’s cleaning efforts and frequency, and continuing to encourage social distancing, have been provided to insureds. Many Associations are making use, too, of carefully crafted waivers, though the effectiveness of waivers remains to be seen and are likely worthless for those under 18 since parents may not sign away their minor children’s rights. The reality is that associations, agents, carriers, and attorneys alike are simply waiting for claims.
The news has been rife, of course, with stories of denied business interruption claims, and the restaurant industry, in particular, has responded with class action suits in an effort to counter long-existent policy language that excludes business interruption loss when there is no property damage.
Where General Liability is concerned, the burden of proof rests with the claimant who alleges contraction of the virus from a business owner’s premise, but carriers’ policy forms that presently have no embedded or endorsed language excluding virus and bacteria loss may have a duty to defend under certain circumstances. That said, the “expected and intended” provision in most if not all liability policies may be triggered given the pandemic situation.
Policy exclusions were to be expected from an insurance industry that never intended or charged premium for a pandemic the proportion of COVID-19. By the end of August, the number of confirmed US cases had well surpassed 5.85 million, and the number of deaths had exceeded 180,000 – and by publication date, those grim numbers will be grossly dated. The randomness of who gets sick and recovers and who does not lends to the fear and uncertainty, and young people age 18-49, previously thought to have less severe cases when they did contract the virus, were the group most frequently testing positive, responsible for surges in cases in Florida, Texas, and coastal towns. By the end of August, no fewer than 30 states – 60% of the country – were among a growing list seeking to avoid increasing their case numbers by requiring people to quarantine for two weeks if they were traveling from a state with a daily positive test rate higher than 10 per 100,000 residents or a state with a 10% or higher positivity rate over a seven-day rolling average.
With carriers having filed and obtained approval for communicable disease/virus and bacteria exclusion endorsements (some being applied with an insured’s renewal as early as July 01), the best hope for community associations and businesses, arguably, is federal legislation that would allow for temporary and specific liability relief, since claims remain likely despite even the most strenuous cleaning and social distancing controls. Absent federal protections, 12 states (as of August 27) have already passed individual liability immunity laws including Georgia, Iowa, Kansas, Louisiana, Mississippi, North Carolina, Oklahoma, Tennessee, Utah, and Wyoming; governors from Arkansas and Alabama have signed executive orders. States that have not passed individual relief must wait until their next legislative sessions begin, but bills are being drafted now.
The unknowns of COVID-19, identified now to have six different strains (and a questionable duration of antibodies for those who have had the virus), have forced many community associations to simply wave the white flag. While community associations have largely been spared business interruption losses (it’s impossible to shut down the very places where people live), the possible coverage gap in General Liability coverage (and certain exclusion with approved endorsements) has resigned many communities to keep their amenities closed.
According to the Community Associations Institute (CAI) in Falls Church, Virginia, some 80% of pools in New Jersey elected to stay closed for the 2020 season, followed closely by Maryland at 56%, and Pennsylvania at 55%. Those states, along with Texas, California, and North Carolina cited fear of legal liability as the reason for their decision, while 42% of states polled cited an inability to meet local, state, and federal requirements. An average of 35% of the associations polled cited increased expenses.
According to the National Institutes of Health in Bethesda, MD, the third phase of a clinical vaccine trial began in late July offering some encouragement that a slowing and containment of the virus may be possible.
The reality is, eradication shouldn’t be expected any time soon, and we should expect ongoing restrictions in the coming months. As many school districts have opted for virtual learning this fall, colleges have canceled football seasons, and many businesses continue work-from-home protocols, how communities work within the “new normal” framework and make decisions in the best interests of their associations will be a critical risk management litmus test to be certain.