Originally published on 03/20/2020 by John Head, President, National Brokerage; Contribution by Zach Burdine, Area President
The COVID-19 coronavirus pandemic sweeping the globe right now will change the way we think about insurance and life forever. We have to let that sink in for a minute as we unravel what our world looks like today and in the future. Unprecedented events like COVID-19 & other life altering events like 9/11, have a cause and effect ripple within our industry that is felt for generations.
Much like the pre 9/11 era, few agents would have asked whether their clients’ business interruption insurance would cover them if they couldn’t access their place of business due to a terrorist taking down the building next door.
But think about this, the coronavirus is unique in that it is effecting everyone from your family to your business to your community. No one is exempt. This event will impact the insurance industry and create changes in human behavior, insurance coverages and undoubtedly in ways we haven’t even begun to understand.
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The Gray Triggers
Having started out in the industry in claims, I always consider the potential coverage triggers when a loss occurs. The outside world views insurance as a contract that’s supposed to be black-and-white, but in reality we know it can be gray and subject to precedents and interpretation.
Currently there’s not a lot of coverage out there for coronavirus-related losses. And it’s too late to buy coverage now. It would be like trying to buy insurance on a coastal property sitting in the path of a hurricane barreling down the coast.
The current coronavirus outbreak is likely to trigger payouts from pandemic catastrophe bonds issued by the World Bank’s Pandemic Emergency Financing Facility, but that coverage is intended to help poorer countries, not Italy or the United States.
And if a first-responder or healthcare worker is exposed to COVID-19 while they’re at work, they’re probably covered under workers’ comp. But what about the grocery store clerk? The bank teller? How do we know where they may have contracted the virus? That’s the gray area that we talk about.
Beyond the Normal Coverage Scenarios
Let’s say your client is a restaurant owner. They can file a claim for lost income if their business is forced to shut down because it was damaged by fire.
But what if the claim stems from the fact that people aren’t patronizing their business because they’re afraid they might contract the coronavirus? There is no physical loss to their property, but a potential catastrophic loss of income putting their business at risk.
Contingent business interruption insurance might pay if the restaurant can’t get its usual supply of fish because the government shut down the seaport.
But coverage would depend on a number of factors: whether your client named their supplier as a covered entity, if this particular situation is covered by the policy, what type of policy was purchased, what triggers an event, and so on.
We have limitless examples of how industries are affected and how insurance responds. What triggers event cancellation insurance, for instance?
There’s a big difference between the government saying people are not allowed to gather in groups of 1,000 or more and the NBA canceling the rest of its season because players have COVID-19.
Every D&O policy has an exclusion for bodily injury. So if an individual sues a big box store’s board of directors because they caught the coronavirus in one of its stores, there’s no coverage.
But a D&O policy might respond if shareholders sue when sales drop after a coffee chain decides to close all of its stores nationwide out of coronavirus concerns.
If you or your client had a trip to Europe planned and had the foresight to buy travel insurance, you probably are covered if your airline canceled the flight due to government imposed travel bans.
But if you or your client decide not to fly domestically because you’re afraid you might be exposed to the coronavirus, it’s highly unlikely that your travel insurance policy would reimburse you.
Fear of flying is not a covered event.
Changing Buying Habits
Whether or not your clients have coverage for losses stemming from the COVID-19 outbreak depends on the specific type of coverage that they bought, and most people buy insurance based on the risks they know they have – based on what they’ve seen or read or heard about.
Before the coronavirus, how many businesses would have even considered a pandemic policy? That’s almost like selling coverage for the Zombie Apocalypse.
But from now on, everyone will be looking a lot more closely at their insurance policies to see if there’s coverage for the next pandemic.
Clients are going to ask for coverage endorsements to help them get through situations like this, or at the very least, they’re going to ask more questions about coverage for similar scenarios.
The Industry Will Respond
Perhaps in the not-to-distant future, there may be a product for this specific risk. We are a solutions-driven industry, second to none in responding to unprecedented events; we quickly find a way to provide coverage and restore confidence in the system.
The insurance industry becomes dynamic and creative in times like this and helps bring us back to the closest version of normalcy possible in the little ways and the big ways alike. Because if it can be insured, you and your clients have one less thing to worry about, and we all can rest easy – quarantined or not.