We continue our efforts to keep you informed of key legal developments relating to COVID-19. Today, our update focuses on relevant issues for businesses as we enter the second month of the lockdown in Illinois and look towards a phased reopening of the economy in the coming months.
For our previous updates, please see HERE.
Yesterday, the Trump Administration issued guidelines for a phased reopening of the economy. President Trump stated that governors would be making the final decisions in lifting stay-at-home orders. See the Guidelines for Opening Up America Again HERE.
In Illinois, Governor Pritzker announced yesterday that Illinois is working with the governors of six other Midwestern states – namely Indiana, Kentucky, Michigan, Minnesota, Ohio, and Wisconsin – on how and when to reopen their economies. See the governor’s press release HERE.
Beginning next week, we’ll be providing more granular protocols and checklists that may guide employers as they prepare for the phased reopening.
SBA Paycheck Protection Program. The SBA’s Paycheck Protection Program (“PPP”) has depleted its $350 billion in funding. Borrowers whose applications have been approved by the SBA will be funded. Applicants whose applications have not yet been approved by the SBA – as well as businesses that have yet to apply – must await Congress’s decision on whether to authorize additional funding for the program.
Press reports indicate that certain banks continue to accept PPP applications pending Congress’s determination. Businesses that have submitted applications that have not yet been approved by the SBA – as well as businesses that are considering submitting applications – should proceed aggressively to ensure a place in line in the likely event that additional PPP funds become available.
Main Street Lending Program. The details of the Main Street Lending program established by the Federal Reserve and the U. S. Department of the Treasury are expected to be finalized in the next few days. These loans will be accessed through commercial banks. Unlike PPP Loans, Main Street Loans will not be forgivable. In addition, originating banks will retain a 5% loan participation, so more traditional underwriting criteria may apply. The program will be available to businesses with up to 10,000 employees or up to $2.5 billion in revenue. No limit on smaller borrowers has been announced, and the program is available to businesses that have already accessed PPP Loans. Borrowing amounts are calculated based on a multiple of EBITDA less outstanding debt.
While the terms have not been finalized, initial indications are that these loans will bear interest at between approximately 2.5% and 4% and will have a four-year maturity, with a deferral of interest and principal during the first year. Main Street Loans will be in a minimum amount of $1 million and a maximum amount of $25 million.
We will provide more details about this program as they become available. In the meantime, clients may wish to begin considering this program as a possible low interest financing source and/or financing alternative in a tight credit market.
Workers Compensation. As we noted in our update on Tuesday (see HERE), the Illinois Workers Compensation Commission has amended its rules of evidence so that an exposure to the COVID-19 virus by a “First Responder” or “Front-Line Worker” – terms broadly defined to include those at essential businesses under the Illinois Stay-At-Home Order – is rebuttably presumed to have arisen out of and in the course of one’s employment. We highlight additional insurance matters for employers to consider below.
Business Interruption. As the COVID-19 crisis and executive orders prohibiting non-essential business activities continue to detrimentally impact companies across various industries, we encourage businesses to review their insurance policies and assess potential coverage options that may mitigate losses stemming from the pandemic. Many companies, for example, maintain business interruption coverage that could provide reimbursement of losses from operational shutdowns.
While the controlling law will continue to develop over the coming months and years, many insurers already have taken the position that COVID-19-related claims are not covered, often because of a lack of physical damage to property (which is frequently a requirement to coverage) or given the existence of a policy exclusion for viral-related injury. As a result, a number of lawsuits have been filed recently against insurers in Illinois for denying such claims. In response, some members of Congress and several state legislatures already have introduced legislation which would require insurers to retroactively rewrite policies or otherwise provide coverage for COVID-19 losses, even where a policy exclusion precludes it. Regardless, the language of the policyholder’s insurance contract will largely control whether coverage is or will be available, and we suggest all business with such policies assess potential recourse.
Coverage for General Liability Claims for COVID-19 Related Illnesses. As states begin to open back up for business, we also recommend that policyholders carefully review their insurance policies and remain on high alert for potential coverage gaps, exclusions or related issues that could imperil coverage for general liability and employer’s liability claims that may arise from employees and third parties asserting COVID-19 exposure or infection in the workplace. The presence of such gaps or exclusions could cause significant uninsured exposure as employees begin returning to work, and it may be possible to supplement your coverage before that happens.
Lastly, we emphasize that any claims should be asserted promptly, as most insurance policies require notification to be given in a timely manner or upon notice of a potential claim. We will continue to monitor legal trends and developments concerning insurance claims stemming from COVID-19 issues and keep you updated.
If you have questions pertaining to your insurance policies, the viability of a prospective claim, potential recourse against an insurer who has denied a claim, or any other insurance-related topic, please contact us.
Virtual Government. There were several developments this week on resuming City functions through virtual platforms, which add to those at the state and county levels.
We will continue to send periodic updates on topics that may be helpful to your businesses. If you have a particular issue that you’d like us to address or if you’d like to be removed from the distribution list, please let us know.
Feel free to contact us with any questions.
Gery Chico, Jon Leach, and Alpita Shah