Insurance company insurance defense counsel often offer articles and opinions worthy of study by policyholder advocates. Most of the time, third-party liability attorneys do not step over into first-party coverage issues. Yet, a notable liability attorney, Randy Maniloff, has done that regarding first-party coronavirus insurance coverage issues.
Manilofff has an excellent internet site, Coverage Opinions, and has written two articles, ISO Excluded Coronavirus Coverage 15 Years Ago, and COVID-19: The Real Operation of New Jersey’s Proposed Insurance Legislation. Both provide views all involved should read. I thought it was funny and accurate when Maniloff wrote in his March 14, 2020, article:
The coronavirus is contagious. The same can be said of articles, penned by coverage lawyers, addressing the potential availability of insurance for losses tied to the pandemic. We’ve lost track of how many we’ve seen. Understandably, as the situation is so novel, and rapidly developing, these articles generally speak in terms of ‘it could be this’ or ‘it could be that’ when discussing which policies may be in the mix and whether they may apply.
Jenner & Block, a policyholder-side firm, put it this way: ‘Nothing in these often undefined terms rules out the possibility of damage caused by the presence of microscopic organisms or requires that loss or damage be visible to the naked eye, or even visible at all.’ Don Henley was right: Lawyers dwell on small details. That may be where this is headed for businesses that had the virus on hand.
Maniloff’ s March 19, 2020, article stated, in part, about the coverage issue:
One of the fundamental prerequisites, to the potential availability of business interruption coverage, is that there be a necessary suspension of the insured’s operations. Such suspension must have been ‘caused by direct physical loss of or damage to’ the insured’s premises.
This ‘physical damage’ requirement – and not the ‘virus’ exclusion – is first and foremost why it will be a challenge to find coverage for coronavirus-caused financial losses under business interruption policies.
[S]ome policyholder lawyers have been arguing that the presence of the virus in a structure, even if it can’t be seen by the naked eye, qualifies as physical damage. Along those lines, there has been discussion, in the coverage context, of scientific research into how many days the virus may live on different surfaces such as cardboard, plastic and stainless steel. There is case law on this ‘physical damage’ issue that both sides will argue supports their position.
But, even if the microbial existence of the coronavirus on surfaces satisfies the ‘direct physical loss of or damage to’ requirement, most businesses have not shut down because the virus was present in their facilities. Rather, businesses are shut, and people are working from home, to avoid contact with others, in hopes of stemming the spread of the virus.
Maniloff’s coverage views are very similar to the views expressed by Bill Wilson in his two posts:
- Business Income Insurance…Does It Cover Coronavirus Shutdowns?
- How the Insurance Industry CAN Help With the Coronavirus Pandemic
Since Wilson wrote a book, When Words Collide: Resolving Insurance Coverage and Claims Disputes, which teaches people how to look and argue for coverage, his analysis with the form policies he is referring to is not an optimistic result. But I remind everybody that you still need to read the relevant policy issued. In his book, Wilson warns:
Answering coverage questions and resolving claim disputes starts with this obvious, but so often disregarded, doctrine: Read The… Policy! What does the ‘F’ in the acronym ‘RTFP!’ stand for? In a public forum, I usually say the acronym stands for ‘Read The Full Policy,’ but I have to admit that there are occasions where the ‘F’ takes on a different connotation for me. For example, when I get a coverage question or claim inquiry where it is clear that NOBODY has bothered to read the policy, to the detriment of the insured, my ire sometimes causes me to consider a different word substitution for the ‘F’ in ‘RTFP!’… so I leave it up to the reader to form their own opinion, perhaps contextually, as to what the ‘F’ means.
Is there any business income policy I have been reviewing that would seem to grant coverage on a fairly consistent basis? Yes. It is called Trade Disruption Insurance. It is generally sold to large companies with complex or global supply chains. It broadly covers such things as quarantine, embargoes, government closures of transportation, and sometimes, pandemics. My research found a high degree of very sophisticated risk management premium cost versus benefit analysis.
Most small businesses will not have this coverage.
Thought For The Day
The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we have applied the best of ourselves to the task at hand.