Coronavirus and its implications for your business

The situation with Covid-19 (Coronavirus) is still developing rapidly and is being carefully followed in Hungary with keen interest and obvious concern. We can now say that it will have a severe social and economic impact. The CMS Budapest teams have already received several client requests to address various legal issues and risks, and help reduce any disruption to businesses.

Companies need to look into their current operations and prepare to adjust to ensure business continuity as well as monitor any developments on the coronavirus issued by the World Health Organisation and the national government.

These are the main areas that may be affected by coronavirus with suggested next steps.

Employment and GDPR considerations:

The considerations of employers and issues/questions coming up regarding the coronavirus are wide reaching. Employers are responsible for the health, welfare and safety of their employees in the workplace. Currently, we advise companies:

• to put in place effective communication with staff regarding national government advice and the business’s approach to coronavirus issues;
• to introduce a (flexible) policy to cover employment issues specific to the coronavirus (working from home, off-work, business and other travel, discrimination), including any proposed departures from normal employment policies; 
• to minimise the impact of absences from the workplace and create a consistent policy on how absences will be managed (absence, self- or mandatory quarantine, refusal to work); 
• to bear in mind the GDPR and how specific employee data can be requested, lawfully collected (e.g. privacy notice for employees and third parties on the collection of personal data for risk management purposes), used and stored e.g. prepare a specific privacy notice for employees and third parties on the – click here for more information; and
• to adopt a management plan to protect business continuity in the event of a severe outbreak. 

Commercial contracts

Businesses have to look at the terms of their commercial contracts, including force majeure clauses, to determine whether they can recover losses or comply with their duty to mitigate risk, or whether this situation allows a party to terminate a contract or to request amendments. Does the coronavirus situation amount to a force majeure event? 

Currently, we advise companies:

• to identify key suppliers and services arrangements;
• to review their key contracts to see what contractual rights may be available and identify those at risks due to, e.g. settlement deadlines or a likely delay in performance;
• to check whether special clauses dealing with extraordinary situations are included or not, including the terms of any force majeure or material adverse change (“MAC”) provisions in the agreement, and whether those would excuse one or all parties from the performance of, or allow them to suspend the performance of, or terminate, their contractual obligations. Please note that no objective force majeure review is needed on a contract-by-contract basis;
• to identify and asses the possible consequences to your business and take steps to mitigate any associated risks. If those supply chains and subcontracting arrangements are impacted, what effect could that have on the supplier’s delivery of goods or services?
• to consider international relations and consequences, and monitor supplier performance closely.

Insurance

Most businesses are assessing their risk of injury and loss arising from the outbreak, including the recoverability of losses under available insurance cover. Increases in claims will be seen across multiple business lines and, at this stage, it is probable that life, health and travel insurance will see the highest losses. However, mounting concerns and intensified precautionary measures are further disrupting markets and supply chains, causing market volatility, and all business lines are potentially impacted. Business Interruption, Supply Chain Risk, Commercial General Liability (CGL), Directors & Officers (D&O), Errors & Omissions (E&O), Cyber security, Event Cancellation/Contingency and Professional Liability insurances are all exposed and should have critical role in protecting the companies’ financial position and even their good repute.

Currently we advise companies:

• to make an inventory of risk pathways that could affect their business and to identify potential sources of liability if the business is impacted by COVID-19.
• to identify and review, before any disruption occurs, their current insurance policies to see whether they provide effective coverage against particular losses with special regard to critical policy conditions such as insured event, exclusions, limit of liability (sum insured) and deductibles. From this perspective, the usually retained Policy Certificate or Schedule is not sufficient and the company needs to request the applicable policy wording in full.
• to detect the possibility and conditions of buying effective insurance products that may respond to the risks and may provide effective protection against losses, if the company is not covered or their current policies are less sufficient.

Join our CMS webinar on 12 March 2020

Furthermore, we attach a CMS Webinar invitation on Covid–19 (Coronavirus) – Key Employment and Commercial Considerations taking place on 12 March 2020.

Should you need any legal advice or guidance on what all of these issues mean for your business and how to tackle them, our teams are at your disposal to help find the right solutions for you.