COVID-19 – Insurance & Indemnity Updates
As the COVID-19 pandemic continues to interrupt normal work and activities, all businesses are seeking whatever remedies are available to them to continue operations. Although the first rounds of stimulus are in motion, more will have to be done for the continuance and survival of many businesses.
The federal and state governments are in discussion with various insurance groups to re-engineer “business interruption” coverage to respond to pandemic type claims. BI coverage would come into play after physical property loss to a business (i.e. fire or flood) until that location could be rebuilt and brought back up to full operations.
While the COVID-19 pandemic did not cause physical property losses, businesses are still halted from continuing operations. Some states are seeking for insurance carriers to pay for these losses anyway.
The problem is, these private insurance carriers did not charge for this unexpected risk, and many could become insolvent if forced to pay such losses. Since policy wording requires “physical loss” and many policies have a “virus” exclusion clearly written on them (due to SARS outbreak in 2003), insurance carriers will seek to not pay business interruption claims.
There are very preliminary discussions to contemplate a federal backstop for COVID-19 business interruption claims, given the economic loss sustained by policyholders.
Insurance industry trade groups have joined the discussion with a proposal to create a small business compensation fund (less than 500 employees) funded by the federal government to process, validate and pay claims submitted by claimants.
An immediate minimum payment would be provided upon submission of a valid claim. Such claims would include business interruption and medical benefits resulting from COVID-19 virus for employees that would not be covered by applicable workers’ compensation insurance.
There are also discussions for a reinsurance vehicle somewhat similar to TRIA (Terrorism Risk Insurance Act) in 2002, which was set up for the government and private insurers to share losses due to acts of terrorism, post 9/11. Of course this new coverage will take a bit of time to create, and there will be a cost associated; although again, subsidized by the government.
For the current time, I would suggest CMC members keeps tabs on their potential business interruption losses (paperwork to prove how much income you are losing).
Also, if you have a property policy with business interruption or “civil authority” coverage (government shut down of operations), advise your insurance carrier you would like to put them on “claim notice” accordingly.
This way, you will be ahead of the game if any government programs come into play with the private insurance carriers.
Insurance Executive and CMC Workforce Member
Levitt-Fuirst Associates, Ltd.
520 White Plains Road, 2nd Floor
Tarrytown, NY 10591
914-457-4244: Direct Phone/Fax