This is interesting. Parts of it seem to convey that the average BOP policy will cover coronavirus losses.
I am finding underwriters are saying much different things. Liberty Mutual and Hartford both flat out said there is absolutely no coverage available for such a loss.
One carrier said loss of income would be covered if it is a civil authority that ordered the closure of a location. (Restaurant)
Another suggested it might have coverage under civil authority.
It really makes me question why such different responses. I then read articles where it says almost no one will have coverage. Then this article seems to be a yes for coverage but maybe a no.
My thought exactly when reading this article; gives hope that there will be insurance coverage for contingent BI in some cases, not others, i.e. civil authority. Insurance carriers will state a flat and resounding “no coverage” which will be up to risk managers and brokers to challenge the language and its applicability. This is the time when agencies who employ full blown claim personnel, working on behalf of the clients, will have the most success in finding coverage. If the client is sent to an insurance company’s 800 number, coverage will be denied.
In any circumstance- read the policies! Also, pay attention if there is a Virus exclusion- most policies have an exclusion for “Virus or Bacteria.” Exclusion Virus or Bacteria: 1) any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness or disease. 2) withy respect to any loss or damage subject to this exclusion, this exclusion supersedes any exclusion relating to “pollutants.”
Yeah…I’m not so sure about coverage here either. Some people in China are not showing up to work so your product is not being made and your service is not being performed…not really a covered peril. I get that some policies will give you off premises interruption if the civil authority but is that what is really happening here? 99% of these workers aren’t sick at all, they just aren’t working. Its not an earthquake, fire, flood, typhoon, labor strike or governmental shut down, etc. so I’m sure there is insurance for that.
The author says standard property insurance policies include business interruption and contingent business interruption coverage. She neglects to add that Virus is a standard exclusion which removes it as a Covered Cause of Loss. To me the article comes across painting a rosy picture that is unrealistic. It might lead some to have false hope of coverage. I’m in favor of challenging coverage, but the first step is to read and understand the policy.
Are you sure virus is a “standard” first party exclusion, I work with dozens of carriers and generally only have seen it applied under third party coverage, the same for “communicable disease” exclusions. I have yet to see it excluded under first party coverages. though they are subject to mold exclusions and pollution exclusions, which depending on the company may include additional language for broadening to microorganisms and bacteria. I am doubtful bacteria would preclude coverage for a virus, doctors are fond of reminding us they are different which is why antibiotics are ineffective against a cold or flu. If your policy has a first party virus exclusion this would be an easy analysis, but otherwise there are multiple gray areas. Carriers are typically falling back on “no direct physical loss” which per this article may be challenged. There is also an interesting question of damage at all — a virus only survives 7 days at most on a surface, usually far less, and is easily cleaned with disinfectant or less.
Business interruption is probably the most significant issue for first party insurance. Whether the business income loss is due to fewer customers or its closure due to order of civil authority, there has to first be a covered cause of loss. First party exclusions under a standard ISO BOP policy, which is primarily used for small and medium-sized businesses has a specific exclusion for virus or bacteria. As such, there is no covered cause of loss to trigger either direct physical damage (if any) to the insured premises or for civil authority that prevents access to the premises. For any claimed homeowner’s losses, the Fungi exclusion in homeowner’s policies that also excludes bacteria, usually also exclude “other microbes” .or microorganisms. Since a virus by definition is a type of microbe, coverage should also be exclude there as well.
ISO came out with Ebola related Property Endorsement for the outbreak in 2014-2015 that included BI/EE/LOR. I’m assuming (or hoping) that they will do the same that if (and hopefully not) this becomes more prevalent in the US
ISO has already come out with 2 advisory optional endorsements that are designed for use with the ISO Commercial Property BI Coverage.
From the ISO release circular
The first endorsement provides limited coverage in the event that a business suspends operations due to a closure or quarantine ordered by a civil authority. This endorsement also provides coverage with respect to dependent property that is named in the policy and for vehicles and mobile equipment, where applicable.
The second endorsement also provides coverage when a business is forced to suspend operations due to the closure (or restricted use) of public bus, rail, or ferry lines by civil authorities.
Causes of Loss – Special Form requires “direct physical loss” due to a covered cause of loss. Fungus, Wet Rot, Dry Rot, and Bacteria are a basic exclusion. Business Income follows property form. No coverage.
The new endorsements need to be filed (for admitted carriers) IF they want to take on the exposure.
Coverage or no coverage. Both arguments have their merits. However, if carriers buckle and pay these claims, where will it end? Do they even have enough assets to cover the tsunami of claims that would follow? On the other hand, when one of these claims makes its way into a courtroom, will politicians broker a deal for their voters or their campaign donors?
Regardless, the safe bet for insurance agents is to turn in any claim their clients report. Let the carriers adjudicate. If insureds disagree with the carriers’ decisions, they have redress through the courts.
Let’s not forget about Hurricane Katrina. Insurance carriers were forced by the courts to pay claims that had previously been denied.
What about travel insurance? If you cancelled a trip or vacation rental and had the event insured, will insurance companies refund you money? Not if you claim the virus caused the event cancellation. This is another rip off! Hopefully, the government did not bail out the insurance companies!
NO INSURANCE CARRIER IN THE U.S.A. HAS PRONOUNCED ITSELF REGARDING POTENTIAL CLAIMS COMING TO NON -FOR PROFIT ” DIRECTORS AND OFFICERS
LIABILITY” WHEN IT COMES TO CORONA VIRUS ALLEGED BY A COMPANY MEMBER
CALLED FOR A BOARD MEETING – IN PERSON” AND THEN SUCH MEMBER CLAIMS
HE GOT INFECTED BY THE CORONA VIRUS DURING SUCH MEETING.
This is interesting. Parts of it seem to convey that the average BOP policy will cover coronavirus losses.
I am finding underwriters are saying much different things. Liberty Mutual and Hartford both flat out said there is absolutely no coverage available for such a loss.
One carrier said loss of income would be covered if it is a civil authority that ordered the closure of a location. (Restaurant)
Another suggested it might have coverage under civil authority.
It really makes me question why such different responses. I then read articles where it says almost no one will have coverage. Then this article seems to be a yes for coverage but maybe a no.
My thought exactly when reading this article; gives hope that there will be insurance coverage for contingent BI in some cases, not others, i.e. civil authority. Insurance carriers will state a flat and resounding “no coverage” which will be up to risk managers and brokers to challenge the language and its applicability. This is the time when agencies who employ full blown claim personnel, working on behalf of the clients, will have the most success in finding coverage. If the client is sent to an insurance company’s 800 number, coverage will be denied.
In any circumstance- read the policies! Also, pay attention if there is a Virus exclusion- most policies have an exclusion for “Virus or Bacteria.” Exclusion Virus or Bacteria: 1) any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness or disease. 2) withy respect to any loss or damage subject to this exclusion, this exclusion supersedes any exclusion relating to “pollutants.”
Yeah…I’m not so sure about coverage here either. Some people in China are not showing up to work so your product is not being made and your service is not being performed…not really a covered peril. I get that some policies will give you off premises interruption if the civil authority but is that what is really happening here? 99% of these workers aren’t sick at all, they just aren’t working. Its not an earthquake, fire, flood, typhoon, labor strike or governmental shut down, etc. so I’m sure there is insurance for that.
The author says standard property insurance policies include business interruption and contingent business interruption coverage. She neglects to add that Virus is a standard exclusion which removes it as a Covered Cause of Loss. To me the article comes across painting a rosy picture that is unrealistic. It might lead some to have false hope of coverage. I’m in favor of challenging coverage, but the first step is to read and understand the policy.
I totally agree with you! Coverage for this? highly Unlikely!
Are you sure virus is a “standard” first party exclusion, I work with dozens of carriers and generally only have seen it applied under third party coverage, the same for “communicable disease” exclusions. I have yet to see it excluded under first party coverages. though they are subject to mold exclusions and pollution exclusions, which depending on the company may include additional language for broadening to microorganisms and bacteria. I am doubtful bacteria would preclude coverage for a virus, doctors are fond of reminding us they are different which is why antibiotics are ineffective against a cold or flu. If your policy has a first party virus exclusion this would be an easy analysis, but otherwise there are multiple gray areas. Carriers are typically falling back on “no direct physical loss” which per this article may be challenged. There is also an interesting question of damage at all — a virus only survives 7 days at most on a surface, usually far less, and is easily cleaned with disinfectant or less.
Business interruption is probably the most significant issue for first party insurance. Whether the business income loss is due to fewer customers or its closure due to order of civil authority, there has to first be a covered cause of loss. First party exclusions under a standard ISO BOP policy, which is primarily used for small and medium-sized businesses has a specific exclusion for virus or bacteria. As such, there is no covered cause of loss to trigger either direct physical damage (if any) to the insured premises or for civil authority that prevents access to the premises. For any claimed homeowner’s losses, the Fungi exclusion in homeowner’s policies that also excludes bacteria, usually also exclude “other microbes” .or microorganisms. Since a virus by definition is a type of microbe, coverage should also be exclude there as well.
Whether the business has a direct or indirect loss related to coronavirus, I’d expect a real fight with the carrier to get the loss covered.
ISO came out with Ebola related Property Endorsement for the outbreak in 2014-2015 that included BI/EE/LOR. I’m assuming (or hoping) that they will do the same that if (and hopefully not) this becomes more prevalent in the US
ISO has already come out with 2 advisory optional endorsements that are designed for use with the ISO Commercial Property BI Coverage.
From the ISO release circular
The first endorsement provides limited coverage in the event that a business suspends operations due to a closure or quarantine ordered by a civil authority. This endorsement also provides coverage with respect to dependent property that is named in the policy and for vehicles and mobile equipment, where applicable.
The second endorsement also provides coverage when a business is forced to suspend operations due to the closure (or restricted use) of public bus, rail, or ferry lines by civil authorities.
https://www.verisk.com/insurance/visualize/verisk-develops-new-coverage-options-in-response-to-coronavirus/
Causes of Loss – Special Form requires “direct physical loss” due to a covered cause of loss. Fungus, Wet Rot, Dry Rot, and Bacteria are a basic exclusion. Business Income follows property form. No coverage.
The new endorsements need to be filed (for admitted carriers) IF they want to take on the exposure.
An environmental policy – site pollution policy – COULD provide coverage for disinfection – if the CDC orders such.
Coverage or no coverage. Both arguments have their merits. However, if carriers buckle and pay these claims, where will it end? Do they even have enough assets to cover the tsunami of claims that would follow? On the other hand, when one of these claims makes its way into a courtroom, will politicians broker a deal for their voters or their campaign donors?
Regardless, the safe bet for insurance agents is to turn in any claim their clients report. Let the carriers adjudicate. If insureds disagree with the carriers’ decisions, they have redress through the courts.
Let’s not forget about Hurricane Katrina. Insurance carriers were forced by the courts to pay claims that had previously been denied.
For Civil Authority to apply, doesn’t the authority have to physically deny entry to the property? There is usually a specific trigger for that too.
What about travel insurance? If you cancelled a trip or vacation rental and had the event insured, will insurance companies refund you money? Not if you claim the virus caused the event cancellation. This is another rip off! Hopefully, the government did not bail out the insurance companies!
NO INSURANCE CARRIER IN THE U.S.A. HAS PRONOUNCED ITSELF REGARDING POTENTIAL CLAIMS COMING TO NON -FOR PROFIT ” DIRECTORS AND OFFICERS
LIABILITY” WHEN IT COMES TO CORONA VIRUS ALLEGED BY A COMPANY MEMBER
CALLED FOR A BOARD MEETING – IN PERSON” AND THEN SUCH MEMBER CLAIMS
HE GOT INFECTED BY THE CORONA VIRUS DURING SUCH MEETING.
HOW CAN THIS CLAIM BE PROVEN TO BE REAL?
HAS ANYBODY OUT THERE HAVE AN ANSWER ?