The Covid-19 pandemic ushered in an unprecedented era in the United States and the rest of the world. It forced many of us to unlearn many things and learn a whole lot more. From the sudden shift to remote work, to, in certain instances, becoming divorced from crucial technologies and tools that we had grown accustomed to using in the office. Covid-19 stretched the abilities of general counsels such as myself. These changes began at a typically busy time in the world of corporate law: the end of the first quarter and in certain cases, the end of the financial year. In addition, many lawyers had to take up the challenge of handling Covid-19 cases and work-related questions. Looking back at this era, I decided to write about what I learned as a general counsel through Covid-19.
Insurance
Insurance is an interesting business. As we tried to understand how our practices were impacted by the pandemic, we went into discussions with our insurers. Because we are involved in contract lifecycle management, the demand for our business soared during the pandemic. However, we worried that if we were forced to close, we would have no recourse. This has been a huge deal across the world. For example, in Paris, the insurance firm Axa denied the claims of restaurants who believed that they were covered for the eventuality that their businesses would be interrupted during something like Covid-19. The Axa case is the most famous example of how people believe they are covered for things that their insurers deny they are covered for. Eventually, Axa settled with the restaurant owners. Luckily, our insurance policy had a business interruption clause, which meant that if we were forced to close, we would have insurance. It’s certainly very difficult to forecast how something like the Covid-19 pandemic will affect your business, but it is important to try and understand what your business interruption insurance actually covers. People often assume that insurers, because of their scale, have perfectly designed contracts, but in some instances, even major insurers have faulty contracts. The Axa case, again, is an example of this: by settling, Axa essentially admitted that it too misunderstood what its contracts precisely meant. So it cannot be overstated how important it is for you to go through your contract with a fine tooth comb. There’s no such thing as boilerplate terms you don’t have to read. Every word counts and could be the difference between coverage and not having coverage.
Issues of Force Majeure
As we hinted above, there are questions among lawyers and insurers regarding the kind of coverage available during a pandemic. Specifically, many people wonder whether under force majeure, pandemic are covered. Here are my thoughts:
In many instances, force majeure exists as part of a network of contracts. In other words, in order to understand your force majeure standing, you need to look at the entirety of your contracts. A manufacturer, for example, will have to look at their network of supply contracts in order to understand what their coverage would be in the event of business interruption. In this way, you will get a better picture of all the knock-on effects that impact your insurance. Force majeure is not usually something that people take into account except perhaps people living in areas prone to natural disaster. The pandemic has taught us to think more deeply about this concept and made us realise the multitude of threats that can impact a business. Again, it’s not just a boilerplate term.
One thing is certain: contracts will be better drafted to reflect the improved understanding we have of the nature of force majeure. At present, we are all rather frustrated with the way that provisions seem to beg the question as to what they actually mean. You don’t know if the provisions suspend obligations for the counterparties. You don’t know how long this suspension should last and if either party can terminate the contract. You don’t know the kinds of obligations the party claiming force majeure has. It’s important for companies to be aware of these issues and to aggressively try and clarify and address them.
Contract Lifecycle Management Systems are Important
I have mentioned several times that contract terms and design are very important and often neglected. There is a more basic question: storage of contracts. The last thing that a business needs is to lose a contract. You need to have all your contracts in your Contract Lifecycle Management system.
Often, even law firms store their contracts in multiple file shares. This is extremely inefficient because, whereas with a contract lifecycle management system, your database of contracts is easily searchable, when you store your contracts in multiple file shares, you make it hard to locate contracts. You give yourself so much work when you do not make full use of a contract lifecycle management system. Work that should take minutes will take you hours if not weeks. When you consider that every transaction is covered by some contract, with some businesses generating hundreds of contracts every minute, you begin to understand the potential troubles a business could be in from failing to quickly locate contracts.
Depositing your contracts in one, easily searchable and organised system will make your business more efficient, and, given what we have learned about the ways that businesses can be disrupted and staff forced to work remotely, it gives you a necessary flexibility. The obligations and clauses of a contract are often needed at a drop of a hat. You need a system that works, not one that will give you problems.
Give Your Customers Confidence
With so many businesses struggling, it should be expected that there would be a general review of business relationships. You should work to support your customers and provide value to them in order to maintain and develop the relationship and create a supportive working relationship. Think about how you can develop a program to support your customers.
Discover more on these issues and help your business become stronger during this pandemic.