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Since 2000, the world has experienced Swine Flu, SARS, MERS, and other lesser-known outbreaks and epidemics. However, none of these “bugs” hit the world at the same time and shut down our entire country. The last time we experienced anything close to COVID-19 was more than a century ago. We are in unchartered territory, and nobody really knows what’s going to happen next. The same is especially true in insurance.
Many have inquired if there is coverage for Business Interruption due to COVID-19. See Google’s autofill display when one types in “Business Interruption.” We can see what’s on people’s minds.
What has changed since our last writing is more states (NJ, CA, PA, MA, and OH) have floated language that would require insurance companies to pay claims. Many argue these are politically motivated “gestures” that have little chance for success. Pandemic related business interruption losses incurred by US small businesses alone are estimated to be between $200B and $300B per MONTH depending on the source and the definition of small business. Insurance industry pundits suggest that states would have to take over insolvent insurance companies after two months of payments. If insurance companies disappear, businesses will have a host of other challenges to navigate. Who really knows?
What hasn’t changed is that insurance companies maintain that coverage for war, nuclear/radiation, and communicable disease are excluded and never intended to be covered. They advise that the magnitude of these types of claims make them not insurable, and the industry could not collect enough premium to cover a pandemic loss. However, what also hasn’t changed is plaintiff attorneys specializing in suing insurance companies for coverage believe they can win, and that precedent-setting case law supports their strategies. Numerous suits have been filed challenging the “physical loss or damage” requirement for Business Interruption coverage. These suits claim that language in states’ stay-at-home orders creates physical loss or damage. Furthermore, legal proponents for coverage argue that customers’ and employees’ inability to access a premise, whether contaminated or not, constitutes physical damage.
Will exclusions hold up? Starting in 2003, following SARS, many insurance companies added “virus” or “bacteria” exclusions to their policies. For COVID-19, attorneys will maintain that it was not the virus that caused the suspension of business, but the government order to shutter non-essential operations. “Civil Authority” language in property policies will need to be examined, and argued, to determine if coverage is triggered. Each side has arguments that they feel strongly committed to. It is a trillion-dollar question. Where it will end up, nobody knows.
What is a business to do? Failure to file a claim in a timely manner can void coverage entirely, and waiting to see how it all plays out will take years. Is the safest course of action to file the Business Interruption claim now and see how the law shakes out later? Whether there is coverage or not, we feel it is important to protect insurance buyers’ rights under the policy, and these rights can be compromised if a claim is not turned in.
Advocacy: In anticipation of the need to prove financial loss, Propel Insurance has created a COVID-19 Business Interruption calculator for Senior Care clients. This worksheet will help care providers laser in on the adverse financial impact caused by these unprecedented events. We encourage you to have your finance team review the calculator and feel free to reach out to a Propel Insurance advocate for assistance or questions. It will be a LONG while before the last chapter is written related to coverage. However, in the interim, the calculations should help Senior Care operators identify the true impact to their companies and serve as a guide to discuss losses with financial partners, landlords, and other stakeholders.
Coverage or not, the implications of COVID-19 will lead to many critical financial discussions.
Please be advised that any and all information, comments, analysis, and/or recommendations set forth above relative to the possible impact of COVID-19 on potential insurance coverage or other policy implications are intended solely for informational purposes and should not be relied upon as legal advice. As an insurance broker, we have no authority to make coverage decisions as that ability rests solely with the issuing carrier. Therefore, all claims should be submitted to the carrier for evaluation. The positions expressed herein are opinions only and are not to be construed as any form of guarantee or warranty. Finally, given the extremely dynamic and rapidly evolving COVID-19 situation, comments above do not take into account any applicable pending or future legislation introduced with the intent to override, alter or amend current policy language.