My phone keeps blowing up regarding the coronavirus income claims while we are working hard catching up on our prior catastrophe losses and learning to work from home. One of our Los Angeles based attorneys, Derek Chaiken, told me: “The dog barking, kids crying and everybody else screaming in the background—Chip, I cannot take it anymore!” I do not think that business slowdown is covered anywhere, but I am certainly not the only business owner with morale problems, given the worldwide circumstances.
Bill Wilson wrote an excellent book, which I have endorsed in, Bill Wilson’s Suggestions for Insurance Professionals’ Duties and Obligations. He wrote about my colleague John Houghtaling’s first filed coronavirus lawsuit in his commentary yesterday, Business Income Insurance…Does It Cover Coronavirus Shutdowns?
Everybody should read Wilson’s opinions and analysis. He is no dummy and one of the best when it comes to insurance coverage analysis and looking for coverage. Yet, I absolutely disagree with him suggesting that coronavirus is like a minimal maintenance dust issue. That is simply wrong. But his thoughts and analysis are important and will be compelling to many.
Here is his conclusion but you should read the entire analysis:
There is a consensus among insurance coverage experts and likely case law that ‘direct physical damage’ of property requires more than superficial, temporary contamination that can be remediated relatively quickly and inexpensively.
Case law that has found superficial ‘damage’ to constitute ‘direct physical damage’ is based on ‘damage’ that has actually occurred, not on ‘damage’ that might have occurred or could possibly occur.
Even where ‘damage’ can be proven, the language of the Civil Authority coverage in the ISO business income forms is unlikely to be triggered, especially when governmental orders, however phrased, are issue not because of any actual property damage, but rather to prevent property damage and, more likely, to prevent the spread of disease from person to person. The ‘property damage’ angle, at best, is an attempt to trigger insurance coverage where none exists and for which no premium was ever collected.
Finally, in the unlikely event that coverage IS triggered, the amount of coverage is likely to be limited. In the case of ‘damage’ at the insured property, there is often a 72-hour waiting period for coverage. Most premises can be remediated within that time frame such that there is little, if any, loss of business income and any extra expense payment is likely to be relatively low. Similarly, the ability to clean the facilities quickly, even HVAC treatment, means that, if the 72-hour period is exceeded, it won’t be by much. And, in the case of civil authority orders, the coverage is usually limited to 2-4 weeks.
I have found that groveling with insurance companies leads to nothing. Yet, our elected Congressmen have done just that with a letter which seems to be begging hardened insurance industry executives to voluntarily pay.
I believe insurance companies should pay for what I prove they should pay for. And I believe we need more laws to hold those executives accountable when they fail to fully and promptly pay the benefits. Congress should ask why they deserve to be exempt from anti-trust laws. But, why should insurance companies pay for something just because we wish it or when it is not covered?
Here is a link to the letter and this is the most pertinent part of the Congressional letter:
Business interruption insurance is intended to protect businesses against income losses as a result of disruptions to their operations and recognizing income losses due to COVID-19 will help sustain America’s businesses through these turbulent times, keep their doors open, and retain employees on the payroll.
During times of crisis, we must all work together. We urge you to work with your member companies and brokers to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage. Additionally, we stand ready and willing to work with you on any future measures that might be necessary to see our country through this trying time.
Finally, Insurance Prospectus suggests that 80% of policies may “silently” provide coverage for the coronavirus disaster. Their analysis concludes:
RiskGenius has estimated that roughly 80% of commercial insurance policies will not have a communicable disease coverage or exclusion clause. This means these policies could be read as being ‘silent’ as to whether losses arising out of communicable disease would be covered. RiskGenius is calling this the Silent COVID Coverage issue.
This has parallels to the Silent Cyber issue plaguing the commercial insurance industry. Namely, many commercial insurance policies did not include coverage or exclusions for cyber events. As a result, these ‘silent’ policies could read to cover cyber events that were not contemplated at the time the policies were drafted. The obvious similarities between computer viruses and coronavirus are also notable.
This “communicable disease” aspect of coverage needs further analysis. But all insurance coverage analysis is just beginning as we sort through all the facts, policies, and possibilities.
This is going to be a very sad working Saturday. Spring is here and life is simply not the same as it was last week when I was reveling in my most recent sailing race on Merlin, which seems like an eternity ago.
Thought For A Saturday
I miss Saturday morning, rolling out of bed, not shaving, getting into my car with my girls, driving to the supermarket, squeezing the fruit, getting my car washed, taking walks.
How About a Song With a With a Band Name We Are Rooting For