As of September 2020, fully six months into the Covid-19 era, commercial policyholders and their insurers continue to battle one another over the insurability or lack thereof for business shutdowns caused by orders of civil authority.
Insurers in the good old USA have taken a firm stand that coverage does not apply, therefore universal denials of coverage for presented claims. The rationale is one of two reasons, the lack of direct physical damage to property caused by a covered peril and/or the inclusion in the policy of some version of a virus exclusion.
By one account of litigated cases adjudicated to date (all pending appeals), the score is Insurers 9, insureds 1. Many more cases are anticipated as we move forward. From my watching insurance company CEO’s on CNBC, or reading business and trade articles on the matter and from viewing of LinkedIn opinions from insurance professionals and from the attorneys who make their livings defending insurance companies there seems to be unanimity among those in the insurance profession that coverage simply does not apply for the aforementioned reasons. To them, it is clear as day.
Some opinions go so far as to posit that, if given the opportunity to purchase pandemic coverage pre-Covid-19, most commercial policyholders would have refused the offer.
I question both positions.
First, I agree that should one actually read their policy one could possibly understand the stated requirements for direct physical loss to occur in order to trigger indirect coverage, Business Interruption. Same with virus exclusions. The problem with that logic is the fact that most insurance consumers do not read their policies. They may be in “plain language” but they are still written in a foreign language so far as most consumers are concerned. There remains controversy as to whether or not the cited exclusionary language is as clearly written as it should have been. The Nuclear Exclusions come to mind as rather clearly drafted.
Most insurance consumers in my experience rely upon the quote summaries provided by their agent or broker. In most instances, losses do not occur, so one does not know whether or not the insurance they purchased is worth the premium paid. In complicated claims scenarios, that simplistic reliance upon the promises of the broker can be incredibly unfortunate, such as now, when claims are not honored as many policyholders expected. The absolute worst time to sit down and read your policies is after you have suffered a loss!
To the insurance pros who think so clearly that had true pandemic coverage been offered pre-Covid-19 it would have been summarily dismissed by their customers I ask them where they pointed out limitations of the policies that they were selling. Where are the quotes to their clients offering solutions for what is now an apparent problem? Where are the sign offs from your clients wherein, they agreed that they read, understood their policies and agreed that as written, coverage was acceptable to them? Where was the option, that they rejected in writing, for them to purchase any missing coverage? Where are the written communications to the consumers telling them that the now desired coverage was unavailable based upon the limitations so apparent now to the insurance professionals selling the policies?
To the insurance consumers, how do you choose your insurance partners? Relationship? Lowest price? Do you read your insurance policies before suffering a loss? Do you obtain competitive quotes? Do you hire independent professionals to evaluate your risks and review your insurance program for adequacy? Do you evaluate coverage for more than just the lowest price offered?
“It is common knowledge to every schoolboy and even every Bachelor of Arts,
That all sin is divided into two parts.
One kind of sin is called a sin of commission, and that is very important,
And it is what you are doing when you are doing something you ortant,
And the other kind of sin is just the opposite and is called a sin of omission
and is equally bad in the eyes of all right-thinking people, from
Billy Sunday to Buddha,
And it consists of not having done something you shuddha.
I might as well give you my opinion of these two kinds of sin as long as,
in a way, against each other we are pitting them,
And that is, don’t bother your head about the sins of commission because
however sinful, they must at least be fun or else you wouldn’t be
It is the sin of omission, the second kind of sin,
That lays eggs under your skin.
The way you really get painfully bitten
Is by the insurance you haven’t taken out and the checks you haven’t added up
the stubs of and the appointments you haven’t kept and the bills you
haven’t paid and the letters you haven’t written.
Also, about sins of omission there is one particularly painful lack of beauty,
Namely, it isn’t as though it had been a riotous red-letter day or night every
time you neglected to do your duty;
You didn’t get a wicked forbidden thrill
Every time you let a policy lapse or forget to pay a bill;
You didn’t slap the lads in the tavern on the back and loudly cry Whee,
Let’s all fail to write just one more letter before we go home, and this round
of unwritten letters is on me.
No, you never get any fun
Out of things you haven’t done,
But they are the things that I do not like to be amid,
Because the suitable things you didn’t do give you a lot more trouble than the
unsuitable things you did.
The moral is that it is probably better not to sin at all, but if some kind of
sin you must be pursuing,
Well, remember to do it by doing rather than by not doing.”