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COVID-19: Insurance Coverage Considerations for Health Care Organizations

As the COVID-19 pandemic continues, health care organizations remain at the forefront of the fight against the virus. And many health care risk professionals are asking how their insurance policies will respond to claims related to COVID-19.

This briefing provides an overview of several key coverages for health care organizations. Risk professionals should keep in mind, however, that the below guidance is current as of April 8, 2020 and conditions may change as the pandemic continues. Policyholders should also note that outcomes will depend on several factors, including individual policy/endorsement language and insurers' positions; health care organizations should refer any questions about their coverage to their insurance and claims advisors.

Medical Malpractice

There should be no change in the way insurers respond to typical allegations, including those revolving around failure to diagnose or delay in diagnosis. Health care organizations, however, should prepare for a potential uptick in the frequency of some claims, including:

  • Failure to provide a safe environment and failure to prevent exposure to other patients and residents.
  • Delay in treatment due to supply chain shortages, including medical devices, medications, and personal protective equipment (PPE).
  • Negative outcomes due to inadequate staffing, overuse of staffing agencies, or the acceleration of credentialing for providers to perform services they may not formally or historically be qualified to provide.

Whether facing a potential claims-made or occurrence claim, health care risk professionals should consider the actual date of any alleged negligence to determine which policy is likely to respond. They should also report claims to primary and excess carriers as per the terms of their policies. And it is important to review policy language, including the definition of “batch” and any potential impacts on retentions, deductibles, and aggregate limits.

The fast-tracking of provider credentialing ― including for physicians or providers trained in different specialties, and those coming from out of state or out of retirement ― for the provision of services during the COVID-19 pandemic may present significant risks for organizations. Insureds should consider with their advisors, and consider notifying underwriters of, any providers approved to perform services outside their current privileges and specialties.

Telemedicine can be an essential tool during a public health crisis, keeping potentially sick patients away from health care facilities where they can expose others or put their own health at greater risk. Some health care systems with captive insurers are adding endorsements to their primary policies to expressly expand the definition of telemedicine/telehealth. In some instances, excess insurers and reinsurers are doing the same.

As COVID-19 has spread, the Centers for Medicare and Medicaid Services has broadened access to Medicare telehealth services, enabling providers to use telemedicine both from health care facilities and their homes. In early March, Medicare began temporarily compensating physicians for telehealth services including, in some circumstances, routine visits unrelated to COVID-19. This waiver will allow a range of providers — including doctors, nurse practitioners, clinical psychologists, and licensed social workers — to offer a specific set of telehealth services. These include evaluation and management, which are common reasons for office visits; mental health counseling; and preventive health screenings.

Many states are also relaxing regulatory requirements for telehealth, including licensing across state lines, to make diagnostic services and treatment available to more patients during the pandemic. This unprecedented ramp-up of telehealth may result in a rise in malpractice claims linked to an increased difficulty in making an accurate diagnosis, limited communication or telehealth experience by the provider, and lack of doctor-patient relationship continuity.

The Department of Health and Human Services’ declaration on March 17, 2020, about the applicability of the Public Readiness and Emergency Preparedness (PREP) Act provides health care organizations and others with limited immunity from liability for covered countermeasures. Risk professionals should stay abreast of any similar emergency regulatory relief proposed by state and federal governments, which may include some immunity from liability. However, the effect of such relief on tort law remedies remains to be seen.

As the pandemic continues, health care providers, especially those with upcoming renewals, should be aware that it may be challenging to build excess capacity for medical malpractice. Some insurers are currently closed to new business and may seek significantly higher premiums for providers at their next renewal.

Workers’ Compensation and Employers Liability

Doctors, nurses, first responders, and other health care employees are at greater risk of exposure to COVID-19 due to the nature of their jobs. Workers’ compensation statutes and case law vary by state, and compensability generally requires that an illness or disease be “occupational.”

If proven that an employee contracted COVID-19 through work, medical expenses and lost wages are typically not excluded. However, as COVID-19 continues to spread within communities, it will become increasingly challenging to determine whether a health care worker was infected in the workplace or elsewhere. Health care workers may be infected by patients or coworkers, but can also get the virus from family members, neighbors, and even strangers.

For excess workers’ compensation programs, a “same communicable disease” endorsement can provide financial protection by aggregating or batching individual claims into one.

While workers’ compensation is intended — in nearly all states — to be the exclusive remedy for job-related injuries or illnesses, employees may also seek to sue their employers for willful or gross negligence.

Additionally, contracted staff, including traveling nurses, locum tenens providers, and doctors from physician practice management (PPM) companies may be able to bring third-party claims against hospitals and other facilities for failure to provide PPE and maintain effective infection control procedures under their employers’ workers’ compensation policies.

General Liability

A general liability policy may respond to a claim brought by a third party for bodily injury or property damage resulting from an alleged unintentional or negligent failure to protect from the virus. Third-party liability typically protects an insured organization from bodily injury occurrences involving non-patients, non-employees, and others, as well as third-party liability for property damage.

Unsafe environment claims are also possible, based on an alleged failure of a health care organization to protect third parties or diagnose and/or treat a patient, which can lead to exposure to visitors, vendors, and others who may be on-site.

Additionally, community needs may require that staff be redeployed to provide other services, such as childcare for essential staff or delivery of meals and medication to patients’ homes. However, general liability policies tend to limit coverage to known hospital operations, meaning that new exposures may not be automatically covered under these policies. Insureds may need to notify underwriters of any desired coverage for new or changed services.

Pollution Legal Liability

Health care organizations face an increased risk of potential pollution legal liability (PLL) claims from the coronavirus, mainly resulting from patients who are receiving treatment. Some policies expressly name viruses and/or bacteria in their standard forms or via endorsement. However, even when viruses are included, coverage may still be limited. Insurers may seek to test whether the transmission of the virus from one person to another is within common PLL policy definitions of a “pollution condition.”

Some PLL policies will cover the cost of disinfection of a property affected by a facility-borne virus. This coverage often has lower limits and a shorter claims reporting timeline, which could mean that insurers would resist claims for regular decontamination after treating each COVID-19 patient.

Wage and Hour

The COVID-19 pandemic has seen a surge in demand for health care services, which is often leading to more hours worked by health care professionals. Organizations providing critical care or experiencing extreme surges in the provision of care or business as well as employers implementing work-at-home strategies must be vigilant to ensure that all employees are properly compensated, especially when it comes to overtime pay. Additionally, meal and rest breaks must be provided in compliance with applicable state laws and contracts with unions and others, and implemented for employees across organizations.

Cyber Liability

Social distancing recommendations have led to an increase in remote work, which could lead to relaxed privacy policies and procedures that make organizations increasingly susceptible to cyber breaches. Additionally, due to their handling of protected health information (PHI), health care entities can be at increased danger of cyber liability claims. These claims could arise from disclosing the names of patients with confirmed COVID-19 diagnoses or the inappropriate access of COVID-19 patient medical records. The increased use of telemedicine and other technologies could also result in more security or privacy incidents.

Directors and Officers Liability

Directors and officers liability (D&O) policies that are currently in force do not have specific exclusions for COVID-19. However, D&O policies typically contain some form of bodily injury and professional services exclusion, which may generally tend to shift potential claims to errors and omissions, general liability, and medical malpractice policies. Companies in financial stress might also see claims against their directors or officers for financial mismanagement and other alleged breaches of fiduciary duties.

Managed Care Errors and Omissions Liability

The COVID-19 pandemic raises a number of new concerns for health care organizations. These could include denying coverage for tests or alleged improper delay or denial of treatment for the virus. Patients could also file claims for surprise billing for services they expected to be covered under their managed care plans. Additionally, failure to update provider directories, inadequate network access due to overwhelmed health systems, and delayed approval of provider referrals could also raise managed care E&O liability concerns.

The global pandemic will likely prompt a number of commercial insurance claims for health care organizations. Whether a claim or loss is covered will depend on the terms and conditions of each policy as well as the facts associated with each specific claim. Health care risk professionals should discuss any specific coverage concerns with their brokers or other insurance advisors — and, when in doubt, report the event, loss, or claim as specified under the terms of their policies.