Advisen FPN

Advisen Front Page News - Friday, March 13, 2020

'Claims in every form of coverage': Coronavirus set to test insurers


'Claims in every form of coverage': Coronavirus set to test insurers

By Erin Ayers, Advisen

The insurance impacts of the coronavirus pandemic remain unclear, but experts agree that the effects will reverberate through the industry and economy for years to come.

In addition to disruptions faced by businesses of all kinds, insurers and brokers also face significant questions about coverage from customers, likely in nearly every line of business. With travel restrictions in place not only by private employers but also governments, businesses are scrambling to determine not only the effect on business but also potential insurance reimbursement.

“I think we can anticipate claims in every form of coverage,” said Robert McCarthy, partner with Goldberg Segalla. “The vectors are just so numerous.” He said he has fielded numerous coverage questions in recent weeks and told Advisen that coronavirus represents “uncharted territory” for businesses and their insurance partners that translate to long hours fielding claims.

“The unfortunate aspect of this for the carrier space, is that they have to accept the claim and examine it, regardless of whether it’s covered,” he said, likening it to the high volume of work after a natural disaster. “That’s yeoman’s work.”

Not only should insurers expect a spike in claims and litigation, they should also expect to see fraudulent claims, according to McCarthy.

“Anytime you’re dealing with that type of volume, here comes the fraud,” he said.

Courtney Zucker, partner at Goldberg Segalla, said a focus has been on business continuity planning as well as coverage opinions.

“You can plan but even with a really solid crisis management plan in place, it’s likely there aren’t that many businesses that have this type of plan in place,” she said. It also remains to be seen whether insurers have anticipated the claim volume and potential losses in their reserving.

Brokers from all over the world are seeking ways to help their clients. Peter Fallon, senior vice president of Risk Strategies, told Advisen that they “don’t want to leave any stone unturned” if coverage can be found in policies, whether it is cyber, environmental, fine art, or workers compensation. Communicable disease coverage is a difficult one to find, he explained.

“it is a tricky peril and one of the reasons it’s tricky is because underwriters don’t have a way to get their arms around what the exposures may be,” said Fallon. “There’s not a single industry vertical that is going to be immune to this.”

An event like the coronavirus outbreak is unlikely to prompt more insurers to get into the market, but it may stimulate more interest in captives or parametric insurance, he said.

In a webinar held on March 11, insurance broker Marsh offered advice for employers, many of whom are limiting travel, allowing employees to work from home, and recommending “social distancing” to mitigate the spread of coronavirus.

Absent direct assistance from governments, businesses need to be consistent in their communications and guidance to employees, Marsh experts explained.

“Misinformation is rampant,” said James Crask, global resilience advisory lead for Marsh Risk Consulting, during the webinar. “A lack of information from their employers is going to add to employees’ level of fear and anxiety.”

As employers work to determine whether their coverage will cover communicable disease-related outbreaks and the attendant disruptions, brokers may want to go over coverage and assess what type of information will be needed in the claims process, according to the Marsh panel.

According to Stephen Fraser, Marsh’s casualty claims director, coronavirus-related litigation is inevitable.

“It’s just a matter of creativity” for attorneys to find a way to sue, he said, whether it’s suing businesses that stay open and risk infecting patrons, or a doctor’s failure to diagnose coronavirus, or any number of other scenarios.

“The hurdle will be causation,” Fraser said. Coronavirus has a long latency period and tying it back to a specific actor may be challenging.

Insurance also may not respond – many claims will come down to specific policy wording. In many cases, there will be communicable disease exclusions or the pollution exclusion which Fraser said has been used “to deny things as common as smoke or grease or mud” despite typically being defined as “solid, liquid, or gaseous irritants.” However, claimants may make the argument that coronavirus falls outside of the pollution exclusion.

Marsh specialists also reminded businesses of the potential first-party impact of coronavirus. Affected businesses can file business interruption claims, but collectability will hinge on the loss scenario, said Paul McVey, Marsh’s U.S. property claims leader. Voluntary closures are “highly unlikely” to be covered, but the trigger will be identified in the policy.

Additionally, given the impact of coronavirus on the stock market and on businesses, directors and officers face potential exposures, just as with any other event that has a material impact on financial results or stock price, according to Sarah Downey, Marsh’s D&O liability product leader.

“A public company director or officer could be sued for materially misrepresenting preparedness for or the impact of coronavirus,” she said.

Employers may face employment practices liability claims if they exhibit any discriminatory behavior in their pandemic response policies or fail to keep their employees’ safety as a top priority. Kelly Thoerig, managing director of Marsh’s EPL practice, said employers should review communicable disease and travel policies, as well as anti-harassment and bullying policies. Employers should also be aware of potential wage and hour liability issues that could arise with employees working offsite, she added.

Employers will also want to keep in mind the toll on morale that extended remote work or quarantines can have on their employees, the Marsh specialists explained. Firms may want to consider exceptions to some policies, said Renata Elias of Marsh Risk Consulting.

“Your people are your most important asset,” she said.

Even while offering advice today, experts acknowledge that the situation changes every day.

“This is not a tornado in Kansas. It’s cropping up everywhere,” said McCarthy of Goldberg Segalla. “And the event isn’t over. At least a hurricane has the courtesy of coming in and coming out. What’s happening today is going to reverberate for years.”

Editor Erin Ayers can be reached at

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