P/C Insurers Put a Price Tag on Uncovered Coronavirus Business Interruption Losses

By | March 30, 2020

  • March 30, 2020 at 2:10 pm
    TheOCG says:
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    Rather than trying to open the entire insurance company wallet, why not just state that the virus exclusion does not apply to Civil Authority shut downs?

    Civil Authority coverage is time limited in every policy I have reviewed, either 2 or 4 weeks. That would cap carriers losses to a certain time period. The Federal relief package can kick in for the stimulus of the economy after that.

    Premiums can then go up after that…but at least we’ll have the economy moving.

    • March 30, 2020 at 2:51 pm
      Jason Upton says:
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      Better yet congress can act and trigger the TRIA program to cover COVID-19. A coverage where premiums have been collected. Granted not based on a pandemic but it would free up money. However I believe the current cap is $100 billion which would even get you 2 to 3 weeks of coverage.

      • March 30, 2020 at 5:14 pm
        Oh Goody says:
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        Only about half of our insureds have TRIA coverage.

        • March 30, 2020 at 6:34 pm
          Jason Upton says:
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          One draft legislation to change the TRIA law would give businesses the opportunity to purchase and backdate TRIA coverage at a multiple of 3x the quoted premium.

    • March 30, 2020 at 5:36 pm
      Bill says:
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      Insurance shouldn’t pay any uncovered losses. That would mean there could be insufficient funds to pay claims for which premiums were actually paid. And it would set a bad precedent that the government just order a business segment to give money to someone else.

      On the other hand, the government could contract with insurers to determine actual losses sustained and fund the payments, including administrative costs. Even so, you’re looking at a massive undertaking that would be worse than if the entire country was hit by a hurricane or flood.

      • March 30, 2020 at 6:36 pm
        Jason Upton says:
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        I think the government stepping up would be the best option. But if they won’t then before the states and courts try to force carriers to pay it all they should update TRIA.

        I think the perfect situation is for the government to handle this one. Then develop a pandemic insurance program for the next time.

    • March 31, 2020 at 11:48 am
      John Connor says:
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      This approach would not be ideal.
      First, the amount of damage that this would do to contractual law in this country would be catastrophic. If you look at the original release from ISO regarding the virus/bacteria exclusion, it was created because of the risk of pandemics and the extreme financial risk that they pose. Look here: https://www.whiteandwilliams.com/resources-alerts-ISO-Excluded-Coronavirus-Coverage-15-Years-Ago.html
      And regardless, the civil authority coverage still would not apply. There still is no “direct physical damage or loss” to insured property that would trigger the insuring agreement of the property portion of the commercial policy. If you cannot get past the insuring agreement, then you won’t even get to the point where you start discussing the nuances of exclusions.
      And, while some slick attorneys are trying to argue that a shutdown of a business to prevent the spread of coronavirus counts as property damage because “coronavirus poses a threat to property,” this likely will not pass muster. A countertop in a restaurant that has been “damaged” by coronavirus by its mere presence could simply be sanitized. It would take a day at the most to completely cleanse an entire restaurant and get it back up and running for service. The reason they are shut down is not *exposure* to the virus, but the potential for visitors to spread/catch the virus. There is no direct, physical damage to the property. If your business is shut down for health code violations, would insurance respond to that?
      If legislatures are concerned about businesses being able to remain operational after this shutdown is lifted, then the only response that they could do without completely destroying the insurance industry as we know it would be to make direct payments or loans to the businesses.

  • March 30, 2020 at 9:27 pm
    knowall says:
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    just don’t cut my commissions to fund this; please and thank you in advance!

    • March 31, 2020 at 1:36 pm
      Craig Winston Cornell says:
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      Remember, your sense of humor should be quarantined during the crises too. Everyone else is following the rules. You need to get on board or the COVID scolds will find you.

      • April 1, 2020 at 3:17 pm
        MarkK415 says:
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        That’s right….all jokes during the quarantine should be inside jokes only…

  • March 31, 2020 at 9:59 pm
    knowall says:
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    I was being serious; agent comp adjustments have been used or proposed adjustments for balancing shortfalls for years

    let’s put this in perspective; there’s a search on for deep pockets to keep the payrolls going — there’s no easy answer!

    • April 1, 2020 at 1:52 pm
      Craig Winston Cornell says:
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      Oh, well in that case, add me to the Down votes. Everybody has to sacrifice something, and I highly doubt the small amount of money from cutting commissions is on anyone’s radar at the moment.

      Cutting commissions from delayed or waived premiums or from the natural reduction in premiums due to payroll and sales reductions? Count me in. How about you?

  • April 2, 2020 at 12:18 am
    Wendy Rose says:
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    Hidden due to low comment rating. Click here to see.

    • April 2, 2020 at 6:02 pm
      Shawna says:
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      I do not believe you are correct in that interpretation.

  • April 3, 2020 at 12:12 pm
    Jim Morse says:
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    President has declared this is a war. Industry may use this to exclude coronavirus claims.

  • April 6, 2020 at 12:08 pm
    Exadjuster says:
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    Sounds like a “Superstorm” (don’t call it a hurricane even though it was) Sandy situation in the making.

  • April 6, 2020 at 1:55 pm
    Rogan C Dwyer says:
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    Interesting comments from one and all. We don’t believe there is enough money in the system to cover all the potential losses to the insurance market. Silent coverage is the biggest issue and for policyholders the immediate issue is cash flow. An agreement between the federal government and insurers whereby carriers act as clearing houses with a government backstop could restore insurers shabby image and pave the way for a 21st century reset for an industry populated by dinosaurs. If carriers fail to pay BI claims, policyholders will turn to E&O suits against agents. Agents should consider sending in reservation of rights letters to the carriers (www.reservemyrights.com)

    • April 8, 2020 at 7:09 am
      PolarBeaRepeal says:
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      I agree with some of your ideas. However, the party responsible; i.e. true, initial source of the claims, should be held accountable, through a form of subrogation through international courts (I now forget the legal term).

      US, or other Global insurers are not the source / party liable.

      Neither is the US Treasury the initial source of the claims. US taxpayers should not be held accountable for the heinous actions of the Chinese government.

      • April 8, 2020 at 7:25 am
        PolarBeaRepeal says:
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        Last sentence above should have included ‘liability insurance policyholders, and stockholders of such companies’ after ‘US taxpayers’.

        Bear culpa.

      • April 8, 2020 at 12:37 pm
        Jon says:
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        This is a ridiculous and legally unprecedented idea. Just because you want to yell at China being responsible doesn’t mean there is any actual legal recourse available or likely. Your logic doesn’t follow here, and if you try to go down this road the US is liable for far, far more to other countries than we could ever hope to get back for a decision like this.

        • April 10, 2020 at 3:32 pm
          anna says:
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          Sorry but you can sue a foreign government or agent in US Courts for tortious acts leading to bodily injury under the exceptions in the Foreign Sovereign Immunity Act. China was told to shut down those wet markets after the first SARS outbreak and they didnt. When COVID started in the wet market they tried to cover it up because they knew they would be in trouble. If true, they are liable for this thing starting and spreading. See 28 USC 1605(a)(2) for jurisdiction in US Courts as an initial starting point.

  • April 6, 2020 at 5:40 pm
    Tiger88 says:
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    If indeed, the insurance carriers are forced to pay on BI claims it will definitely cause some extreme financial issues and a massive hard market. And not just in commercial lines. There are restoration companies telling people that they can completely “eradicate COVID-19” from their homes with a special cleaning. Some of them allege that property owner’s HO policy will pay for such a cleaning under the mold/fungii coverage piece. So, if many of the HO companies have to pay for cleaning each and every house in America (subject to the deductible of course) and every single business income claim that would, based on my expert financial analysis would equal approximately…insolvency.

  • April 8, 2020 at 7:56 am
    PolarBeaRepeal says:
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    Imagine that a warehouse caught fire in a commercial industrial park after midnight and the security guard saw it and called the building maintenance manager to see it. Neither the guard or manager pulled the fire alarm, but instead the building manager called the owner who instructed him/ her to try to put out the fire, but the fire grew out of control and burned it down AND most other warehouses in the industrial park. In this scenario, who should pay for the damage?

    Should the insurers of the individual buildings pay each owner?
    Should the insurer of the building of the source fire pay all owners?
    Should each building owner pay out of pocket for their own buildings?

    Should policyholders of the multiple insurers pay higher premiums in the immediate future hard market to recoup the losses? {recoupment isn’t legally permitted; I included it for a near comprehensive list of all options}

    Should stockholders of the insurers of the buildings, or single insurer of the source fire building, pay through loss of the insurers’ surplus, thus indirectly their stock value?

    Should only Billionaires be held accountable for the losses? {added to appease ‘Bernie Bros’}

    Should the security guard or building maintenance foreman be held accountable?

    Should the owner of the building of the source fire pay?

    • April 8, 2020 at 8:07 am
      PolarBeaRepeal says:
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      Of course, I intentionally omitted “US taxpayers and their descendants who didn’t yet vote on anything, should pay.” as an option. Many posters have already selected this as ‘the only’ option.

      To those posting comments above that the US government is the proper ultimate source of payment, I must ask “WHY should it be a reasonable/ a justifiable/ the only option?”.

    • April 8, 2020 at 12:43 pm
      Jon says:
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      By the way the policy form is written, it sounds like maybe the owner should have called the fire department and didn’t, which I imagine would put liability on him in some way. I don’t know, I’d have to read the policy.

      Your example does not apply to a global pandemic virus. As much as you want to try and put the blame on China (and will go to exceedingly eccentric lengths, such as entirely unrelated lengthy examples) you can’t. There is no legal precedent for your frankly laughable opinion on the matter.

      Bringing in “Billionaires” is yet another condescending attempt from the aging right to illustrate a point they’re too stupid to comprehend. Personally I support a system that taxes billionaires at a higher rate and allows people in this country to actually get healthcare and education even if they’re not born into a wealthy family, your opinion appears to be if you’re not old and already wealthy too bad. Sorry boomer, younger people agree with me more than you.



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