Author: HPS_III

This morning, President of the American Tort Reform Association (ATRA) Sherman “Tiger” Joyce published an op-ed on the trial bar’s pursuit of misguided class action litigation in states across the country in a futile attempt to get business interruption insurance (BI) to cover COVID-19 losses.

In his piece, Joyce discusses how the trial bar has misled business owners and placed their own profits ahead of the businesses who are struggling most.

According to Joyce:

• Many trial attorneys seek to capitalize on the pandemic crisis for their own financial gain. “Across the nation, plaintiff’s attorneys are pouring money into advertising, encouraging businesses affected by the government-mandated lockdowns to seek legal recompense. From January to May alone, law firms have spent upward of $67 million on mass tort television advertisements, in the hopes that their call to action will spur on a wave of COVID-19-related lawsuits.”
  

• Trial attorneys’ playbook—used now in their anti-insurer BI insurance trend—is not novel. “Unfortunately, these underhanded tactics are nothing new for the trial bar. Whether they’re suing the chemical industry over polyfluoroalkyl substances—synthetic chemicals found in various kitchen appliances—or taking McDonald’s to task over spilled hot coffee, the lawyers’ modus operandi is the same. They “sell” litigation as the way to solve society’s problems.  And now, they’re attempting to repeat that process with COVID-19. Only, when it comes to the issue of business interruption insurance, the stakes are much higher.”
  

• Trial bar’s claims that insurers must cover losses from COVID-19-related government shutdowns is misguided as BI necessitates physical damage. “According to the National Association of Insurance Commissioners (NAIC), the primary regulators for insurers, ‘business interruption’ insurance policies generally do not cover losses due to a pandemic. These policies are intended to cover costs associated with physical damage, not viral contamination. Recent court decisions support this view, but the volume of litigation is expected to continue to grow, and lawyers will continue to recruit clients all in the hope of settling claims and reaping outsized fees for themselves.”
  

• Forcing insurers to cover COVID-19 BI claims would be detrimental to policyholders filing covered claims and to the insurance industry—a backbone of the U.S. economy. “If insurance companies were required to cover the full extent of businesses’ COVID-19 claims, the result would be catastrophic. According to the NAIC, the industry would be bankrupted very quickly. In addition, this would deprive policyholders who need these assets to pay claims for recent hurricanes, wildfires and more routine auto accident claims. The resulting bankruptcy would ripple throughout the already-tenuous economy. Businesses would close, Americans would be laid off, and our nation’s economic recovery would be threatened.”
  

To date, there has been a growing list of court decisions in state courts across the U.S. that prove standard BI policies don’t cover COVID-19 shutdowns. Direct physical loss or damage must occur for a BI claim to be triggered, and government orders do not constitute direct physical loss or damage to property.

If interested, the op-ed can be found pasted below and here. For more information and resources, go to fairinsure.org.

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InsideSources: For trial lawyers, COVID-19 Is Just Another Feather In Their Cap
By: Sherman “Tiger” Joyce, 9/23/20

There’s no question the coronavirus pandemic has taken a heavy toll on our nation. It has caused the deaths of nearly 200,000 Americans, brought about unprecedented economic turmoil and continues to harm the lives of everyday people.

But not everyone is lamenting the devastation wrought by the coronavirus. Indeed, for certain trial lawyers, COVID-19 isn’t a tragedy — it’s an opportunity.

As America is struggling to recover from the crippling effects of the economic lockdown, many unscrupulous lawyers are attempting to capitalize on the crisis for financial gain. Across the nation, plaintiff’s attorneys are pouring money into advertising, encouraging businesses affected by the government-mandated lockdowns to seek legal recompense.

From January to May alone, law firms have spent upward of $67 million on mass tort television advertisements, in the hopes that their call to action will spur on a wave of COVID-19-related lawsuits. In fact, some firms received millions of dollars in federal aid under the Paycheck Protection Program, which they then used to boost their firms’ advertising budgets.

These lawyers aren’t seeking solutions; they’re just creating burdensome litigation as part of a get-rich-quick scheme by targeting America’s insurance companies.

Sadly, we’ve seen this countless times before: Avaricious lawyers latch onto the hot-button issue of the day, concoct unfounded legal theories, mount massive public pressure campaigns, and flood the civil court system.

They use various tactics — from advertising and media blitzes to celebrity cameo appearances — to increase the popularity of the narrative they are concocting and compel their targets to settle. This is the trial lawyers’ playbook, and for them, the merits of the cases they bring are almost irrelevant.

Courts have already been inundated with claims against insurers. Plaintiffs have filed more than 1,100 COVID-19 lawsuits, claiming that insurance companies should be required to foot the bill for the costs to businesses caused by government-mandated lockdowns. This assigns responsibility to the wrong place.

According to the National Association of Insurance Commissioners (NAIC), the primary regulators for insurers, “business interruption” insurance policies generally do not cover losses due to a pandemic. These policies are intended to cover costs associated with physical damage, not viral contamination.

Recent court decisions support this view, but the volume of litigation is expected to continue to grow, and lawyers will continue to recruit clients all in the hope of settling claims and reaping outsized fees for themselves.

Unfortunately, these underhanded tactics are nothing new for the trial bar.

Whether they’re suing the chemical industry over polyfluoroalkyl substances — synthetic chemicals found in various kitchen appliances — or taking McDonald’s to task over spilled hot coffee, the lawyers’ modus operandi is the same. They “sell” litigation as the way to solve society’s problems.  And now, they’re attempting to repeat that process with COVID-19. Only, when it comes to the issue of business interruption insurance, the stakes are much higher.

If insurance companies were required to cover the full extent of businesses’ COVID-19 claims, the result would be catastrophic. According to the NAIC, the industry would be bankrupted very quickly.

In addition, this would deprive policyholders who need these assets to pay claims for recent hurricanes, wildfires and more routine auto accident claims. The resulting bankruptcy would ripple throughout the already-tenuous economy. Businesses would close, Americans would be laid off, and our nation’s economic recovery would be threatened.

Clearly, the trial bar’s preferred outcome — waves of litigation to force lucrative settlement deals — isn’t the best path forward for the United States. It doesn’t benefit business owners, who are forced to expend time and effort on lawsuits likely to be dismissed.

It stretches the resources of America’s already-overburdened civil justice system beyond its limits. Finally, it threatens to bankrupt the insurance industry, dragging the U.S. economy down with it in the process.

So, who does the trial attorneys’ litigation playbook benefit? Only the lawyers themselves.

For these individuals, COVID-19 is merely another money-making opportunity — another feather in their cap — even if that profit comes at everyone else’s expense.

Sherman “Tiger” Joyce is the president of the American Tort Reform Association. He wrote this for InsideSources.com.

Did you know the history of business insurance can be traced back to a 17th century coffee house in London, where ship owners and merchants would gather to discuss commercial risks?

Triple-I CEO Sean Kevelighan notes this long history of insuring the risks and hazards facing companies big and small in a new op-ed in NJBiz. Since the beginning of business insurance, Kevelighan writes, insurers have repeatedly stepped up as financial first responders. Whether in the aftermath of the 9/11 terrorist attacks or in response to the still ongoing 2020 hurricane and wildfire seasons, insurers have covered claims to mitigate losses for businesses large and small.

Yet unlike these covered catastrophes, global pandemics are largely uninsurable for two primary reasons:

• First, viruses do not cause direct physical damage to properties. “A business insurance policy is triggered as the result of properties incurring physical damages, such as fire, hurricanes, or vandalism.
  

• Second, standard insurance policies have explicit exclusions for pandemics. “As further clarity to the direct physical damage issue, in the U.S., standard policies provide an exclusion that is clearly presented and prominently presented on the policy declarations page.”
  

“Only the federal government is capable of providing the financial relief that is needed by so many businesses today,” Kevelighan concludes.

Read the full op-ed here.

For more information, visit fairinsure.org.

The U.K. High Court issued a decision on pandemic-related business income (interruption) insurance (BI) claims against a set of 21 representative policies issued by 8 insurers presented by the UK Financial Conduct Authority (FCA), backing policyholders “on the majority of key issues.”

This decision is unlikely to apply to BI litigation in the U.S., as policies in the FCA test case do not include language requiring direct physical damage to property. As a reminder, a growing list of court decisions in the U.S. affirm that direct physical damage is necessary to trigger a BI claim. 

Media outlets have noted FAIR’s commentary as explanation for why the U.K. findings are not applicable in the U.S.: “Direct physical loss or damage must occur for a BI claim to be triggered, and government orders do not constitute direct physical loss or damage to property.”

For more, see the links below or visit fairinsure.org.

• FAIR: U.K. High Court Ruling: Why It’s Not An Indicator For The U.S. BI Litigation
• Reinsurance News: FCA’s test case ruling irrelevant to current US BI litigation: FAIR
• InsuranceNews.com.au: UK regulator calls for insurers to respond to test case ruling

The past weeks have seen a flurry of legal activity in the ongoing debate surrounding business income (interruption) insurance (BI) across the country. 

While the vast majority of these cases have been decided in favor of insurers, it’s important to remember how this debate is integral to ensuring the insurance industry is able to fulfill its critical role in communities across the country.

A reminder of the key points to keep in mind:

• BI policies were never intended to cover pandemic risks. BI contracts were underwritten and designed to cover insurable risks stemming from physical damage, such as natural disasters and riot damage. These policies were not underwritten or priced to reflect the cost of pandemic risks.
  

• Reinterpreting insurance contracts would jeopardize the policyholder surplus. If insurers are forced to cover pandemic risks for which they did not collect corresponding premiums, the policyholders’ surplus—the cumulative value of insurers’ assets, minus their liabilities—could be placed in jeopardy. The surplus is set aside to pay claims resulting from covered events that cause direct physical damage to property, such as fires, tornadoes and hurricanes.
  

• These actions could undermine insurers’ ability to offer affordable BI policies in the future. New York state superintendent of insurance Howard Mills recently wrote that if insurers were forced to cover pandemic risks, “business owners would not have the ability to purchase affordable BI insurance and would be deprived of coverage when non-pandemic disaster strikes.” 
  

For more information on the true cost of rewriting BI policies, take a look at our fact sheet.

Two recent court rulings reaffirm that business interruption (BI) policies are not designed to cover pandemics; A direct physical loss is necessary to be eligible for a BI claim. 

On September 11, a California federal judge, U.S. District Judge Cathy Ann Bencivengo, ruled in the U.S. District Court for the Southern District of California that two barbershops were not eligible for a business interruption insurance payout. U.S. District Judge Bencivengo, in her ruling, cited the growing list of rulings in favor of insurers in similar cases on the issue of BI coverage. 

On September 14, in a similar California suit, another California federal judge ruled that San Francisco retailer Mudpie Inc.’s business losses during the pandemic are not eligible for a BI claim. When dismissing the plaintiff’s claim, U.S. District Judge Jon S. Tigar noted that government stay-at-home orders were not enough to warrant a claim, considering the plaintiff suffered “no permanent loss of its property, so once the orders are lifted, the retailer will get its property back without any need to repair, replace or even disinfect the site.”

These two court decisions lengthen the list of rulings that prove BI policies don’t cover COVID-19 shutdowns. Direct physical loss or damage must occur for a BI claim to be triggered, and government orders do not constitute direct physical loss or damage to property. 

For more information, visit fairinsure.org.

Natural disasters such as hurricanes and wildfires can upend thousands of lives and cause incredible amounts of physical damage. This summer has made the awful power of these disasters even more clear, as Hurricane Laura battered the Gulf Coast and wildfires continue to devastate communities across the western United States.

In these moments of crisis, Americans count on their insurers for assistance, perhaps as much as they rely on first responders and government agencies. The industry’s response is its way of helping hundreds of thousands of people in need in the fairest way it can – by providing financial support for damages covered by insurance.
 With its landfall August 27, Hurricane Laura ravaged southwestern Louisiana and parts of Texas, causing at least three dozen deaths and extensive property damage. As many as 17,000 residents were evacuated and as of mid-September thousands seem likely to be without power for several weeks more.

Insurers are always ready and able to step up to help homeowners and communities rebuild. Following Hurricane Laura, this will mean covering an estimated $8 billion to $12 billion in insured claims. The industry could end up paying even more than that this year to supply funds that will help fire victims in the west get their lives back on track.

Insurers have a long record of helping customers and economies rebuild in natural disasters. Fifteen years ago customers received more than $50 billion to help them recover from Hurricane Katrina, the costliest hurricane in U.S. history. Hurricane Laura’s timing and direction mirrored that of two other hurricanes, Harvey (2017) and Rita (2005), during which the industry paid nearly $20 billion and $6 billion in insured damages respectively. (All dollar amounts have been adjusted for inflation.)

As the hurricane and wildfire seasons continue, with some analysts expecting more severe catastrophes than ever before, insurers are prepared to serve communities around the country. Whether that’s setting up early warning centers in Colorado, monitoring hurricanes in real time from Florida, or sending adjusters into neighborhoods most affected by the LNU Lightening Complex Fire in California, resilience and recovery are core values deeply ingrained in insuring the risks of natural disasters. 

Following a natural disaster, policyholders with relevant coverage often file claims based on their business interruption policy. This is precisely what that coverage was intended for—the times that businesses have sustained physical damage from disasters like hurricanes, wildfires, or earthquakes.

Keeping these commitments to Main Street – helping small businesses and communities across the country manage risks both known and unknown – is an incredible responsibility that insurers take seriously and work every day to uphold as financial first responders. 

To learn more about business interruption insurance, visit the Future of American Insurance and Reinsurance (FAIR). For more on the role of insurance in natural disasters, visit the Insurance Information Institute (Triple-I).

As policymakers return to Washington and debate how to best help the economy recover from the COVID-19 pandemic, one thing is certain: American businesses need a government-backed solution to get our economy back on its feet.

Recent polling conducted by CivicScience and initiated by FAIR illuminates how the American public is thinking about this crisis and the road ahead:

• The majority of Americans believe the government should bear the financial responsibility for helping businesses stay afloat during the pandemic.* A government-backed policy solution can provide immediate relief to struggling business owners and protect insurers’ ability to keep promises to policyholders for covered catastrophe losses, like damage from wildfires and hurricanes.
  

• Only 16% of Americans believe insurance companies should bear the responsibility for helping businesses during this unprecedented time.* Business interruption insurance contracts were not priced to cover global pandemic risks, so forcing insurers to pay for claims their policies weren’t priced to cover would harm all policyholders. 
  

• Only 8% of Americans say trial lawyers’ lawsuits against insurers is the best path for businesses to secure financial relief.* Trial attorneys’ attempts to retroactively force uninsurable pandemic coverage in business interruption insurance contracts is detrimental to policyholders, communities, insurers, and economic growth.
  

One thing is clear—Americans across the country widely recognize that only the federal government can provide the true relief business owners need. Business interruption insurance was never intended to cover global pandemic risk. The sheer scope and magnitude of loss associated with a pandemic of this nature is unprecedented and extends far beyond the ability of the insurance business model to address, and that’s what makes it uninsurable.

This fall, it is imperative that policymakers put in place the policies needed to help us recover from the massive economic damage COVID has caused to businesses of all sizes across the country. While there are no shortage of political distractions, the urgency for a government-backed solution for struggling businesses in need of relief has never been greater.

*Polling conducted by CivicScience and all commentary is attributed to FAIR.

For more information, please visit fairinsure.org.

Late last week, the U.S. District Court for the Eastern District of Michigan ruled in favor of insurers in a business interruption lawsuit filed by a Michigan chiropractic practice. 

“‘Accidental direct physical loss to Covered Property’ is an unambiguous term that plainly requires Plaintiff to demonstrate some tangible damage to Covered Property,” wrote Judge Thomas Ludington in his decision. “Because Plaintiff has failed to state such damage, the complaint does not allege a Covered Cause of Loss.”

The plaintiff sought coverage on COVID-related business losses as well as damages from the insurers’ alleged breach of contract based on its “all risks” business interruption insurance policy, which had an virus exclusion. Even if business interruption losses were caused by accidental direct physical loss, the Judge further explained, the virus exclusion still applies.

The number of federal and state courts that have noted the absence of physical damage, required in business interruption claims, is approaching double-digits. The growing list includes federal courts in Florida, California, Texas, and New York, as well as the Eleventh Circuit and courts in the District of Columbia and Michigan.

You can read more on the latest Michigan federal court ruling here and here.

For more information, please visit fairinsure.org.

Yet another court ruled in favor of insurers recently in the ongoing dispute over business income (interruption) insurance (BI) today. From Business Insurance:

“The virus exclusion in a dentist’s commercial insurance policy with a unit of Nationwide Mutual Insurance Co. bars coverage for coronavirus-related losses, a federal court ruled Wednesday.” 

Today’s decision from the U.S. District Court for the Middle District of Florida in Fort Myers adds to the growing list of rulings decided in favor of insurers, and delivers a clear win for the integrity of contracts. Efforts to reinterpret or retroactively change provisions in insurance contracts have met fierce resistance in courts across the country. From the ruling:

“‘Because [the plaintiff’s] damages resulted from COVID-19, which is clearly a virus, neither the Governor’s executive order narrowing dental services to only emergency procedures nor the disinfection of the dental office of the virus is a “Covered Cause of Loss” under the plain language of the policy’s exclusion,’ the ruling states.”

Read more here, via Business Insurance.