When Hotels Become Hospitals: A New Set of COVID-19 Risks

Hotels, arenas and other entertainment venues are transforming into makeshift health care facilities to aid in the coronavirus fight. Welcome to the new normal in hospitality.

By: Jared Shelly | April 7, 2020

Late winter at the Liacouras Center in Philadelphia typically means huge crowds for college basketball. Spring brings concerts, wrestling and other attractions.

This year, 200 hospital beds line the expansive arena floor, transforming the 10,000-seat venue into a makeshift health care facility.

Welcome to the new normal in hospitality.

Facilities of all types are being repurposed to help health care facilities overwhelmed by coronavirus.

Hotels, arenas and convention centers that would otherwise be sitting dormant are turning into hospitals, quarantine centers or dormitories for health care workers.

A once bustling hotel in Columbus, Ohio has been transformed into a shelter for homeless coronavirus patients. The City of Austin leased a 292-room hotel for quarantine and isolation purposes.

There are similar examples across the country.

The new arrangements make sense for all parties. Operators of hotels and arenas can earn revenue while doing community service. Cities, municipalities and health care organizations get access to large spaces to handle patient overflow.

The Risk of Repurposing

But repurposing those facilities comes with serious risks and lots of questions. What if hospitality workers get sick while a venue is being used for another purpose? Can you reasonably expect janitorial staff to clean up medical waste? Is insurance coverage still valid?

Making the decision to repurpose a facility should depend on the level of insurance protection you’re getting from the third-party group, said Sean Murphy, senior director and vice president of the hospitality practice at Arthur J. Gallagher.

“It’s an easier decision, though still not without risk to the hotelier, if the third-party has good insurance, takes full indemnity, leases the facility from the owner, and agrees to make sure it’s cleaned and disinfected afterwards,” Murphy said. “But these are still unchartered waters and should be evaluated on a case-by-case basis with counsel.”

When life returns to normal, will customers be reluctant to visit a hotel or arena used to house patients? Even if medical professionals and hospitality facility operators take every precaution to mitigate future risks, it might not be enough to quell public perception.

It’s All About Perception

Gigi Norris, co-leader of the Pandemic Task Force at Aon, argues that businesses should accentuate the positives — namely doing valuable community service during a time of great need. They should also show how they cleaned and disinfected the facility before returning to normal operations.

Perhaps a coordinated social media and marketing effort can help ease the worries of potential customers.

“It’s about managing the message. You’ve got to tell your story. You must explain that you used your asset to support the community in a time of crisis and that this activity fits into your Environment, Sustainability and Governance (ESG) framework,” Norris said.

Keeping Your Workers Safe

Another big factor is employee safety. If a front desk worker or bellhop at a hotel is suddenly working in a make-shift coronavirus hospital, how can their safety be assured?

“Communicate plainly and clearly that you’re going to do everything you can to protect them and that you’re leaving healthcare work to the healthcare workers,” Norris said. “Make sure they know they’re just responsible for the traditional work done in hospitality.”

Another risk is coverage. If you are changing the primary use of the facility, does insurance coverage like general liability or workers’ comp become null and void?

Greg Scheinman, shareholder at Insgroup Inc. said to be upfront with carriers to help understand if coverages change.

“I don’t know if there’s a definitive answer there,” Scheinman said. “I would recommend having a conversation with agents and insurance carriers about a fundamental change in their risk profiles to find out if they are or are not covered.”

Doing this correctly takes process mapping — a deep understanding of the tasks workers do day after day and how they change when a facility is repurposed. Perhaps cleaning, laundry and security responsibilities fall to the occupier not the housekeepers, while food preparation stays in-house.

“I would imagine the manner you would clean an arena after an event is different from the manner in which you would clean a hospital room,” said Scheinman. “And I imagine the training and what those individuals are exposed to during the course of their jobs is very different.”

In any event, it’s a great time to review your contingency plans, said Norris.

“Use this time as a general business continuity exercise. Think about how a loss of human capital can affect what you do as opposed to a loss of a building.” &

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.