by Tom WIchert, Principal & CEO on Mar 11, 2020
It has always been the goal of Wichert Insurance to provide Risk Management and Insurance services that go beyond the sale and service of insurance policies. Businesses and individuals face all types of risks that must be first identified, measured, and then evaluated. Treatment of the risks can involve many possibilities, including risk management or loss control by way of prevention and reduction techniques. After those steps, there is the purchase of insurance products designed to address exposures broadly segregated into Property or Liability Exposures.
Products addressed by insurance tend to be those that can only cause harm and not "speculative" risks that also run with life and business. The losses covered by insurance are those that are definite in time, place, cause, and amount. The losses must be relevant to enough people willing to pay a reasonable premium for protection. They are outside of the control of the insured, and most importantly, must be not too catastrophic for the group willing to participate.
Flood Insurance comes to mind. A person living on the hill will not pay much for the risk while the person in the flood-prone area will pay much more. However, the Federal Government steps in to provide the subsidized market for most flood insurance because of its catastrophic nature.
Other examples include the exclusions of War or Nuclear attack on insurance policies. Additional exclusions joined the War and Nuclear exclusions after the 9-11 terrorist events. On 9-11, we discovered an "event" that was not quite "war," but also more than the insurance industry as a whole was willing to face in future attacks. Hence, the Federal Terrorism Backstop has been available to assist private carriers to handle a large scale Terrorist event.
Similarly, emerging exposures in pollution, mold, mildew, viruses, fungus over the years resulted in additional exclusions to limit, or at least confine the exposures to the commercially insurable types. Businesses with these exposures may address each with specific policies at premiums far greater than what would be acceptable to the broader public.
The emergence of the novel COVID-19 (Coronavirus) has produced a unique reaction quite different from past crises. Prior disease outbreaks such as SARS, which seemed to pass us without the current tone of concern, resulted in the addition of exclusions for viruses to most policies. Let's look at the easy ones first.
Health Insurance will cover medical expenses with few limitations. The Federal Government just last week made sure to include the testing as a covered procedure. To the extreme, Life Insurance will also cover an event resulting from the virus.
But what about Workers' Compensation? Workers' Compensation laws and benefit requirements generally have not recognized ordinary communicable diseases, while some occupational illnesses such as cancer from long term exposure to hazards have been recognized. Outside of healthcare workers, it would be rather groundbreaking to have liability implied to employers for the exposure of this communicable disease.
Property Insurance that includes Business Interruption Coverage under ISO (Insurance Services Office) forms provide coverage for “covered causes of loss” that generally must be at the insured premises. This can be broadly defined to include a government shut-down. However, the lack of the peril being covered and question of being at the insured location makes this a real stretch. The exclusions mentioned above for viruses, mold, fungus, or pollution will generally not allow a business interruption claim to be triggered.
The General Liability Policy may actually lack a “virus” exclusion although mold and fungus exclusions are common in response to “sick building” situations. There are also wide ranging Pollution Exclusions that may apply to the situation. The chance of a busines becoming liable for damage arising out of the disease is difficult to project, and coverage applicability will depend on individual claims. Businesses undoubtedly will have various degrees of liability that may take years to understand.
As your advocate, Wichert Insurance will diligently look at every situation brought to our attention to ascertain coverage applicability. One size does not fit all, and we clearly could expect to see additional twists and turns that may trigger coverage.
We can say with confidence. There is little likelihood the industry will work to broaden coverage into the face of this uncertainty. ISO has developed Coronavirus endorsements that tend to sharpen these exclusions with surgical precision and then offer sub-limits of coverage. These endorsements have not been filed with various regulators, nor have we heard of any insurers willing to adopt these approaches while the crisis is in progress.
Do not hesitate to contact us to discuss your specific situation and concerns. Here is a link to our Coronavirus Information Page that lists resources to inform and address COVID-19.