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NEW POLL: Pandemic Relief Should Come From Policymakers—Not Litigators

The vast majority of Americans continue to believe that COVID-19 relief should come via public policy solutions — and not litigation — according to polling released this week by the American Tort Reform Association (ATRA). 

Key takeaways from the poll include:

  • 59% say those harmed by the pandemic should get assistance from policies passed by elected officials, versus just 7% who say they should get payouts from lawsuits
  • 74% say small businesses affected by COVID-19 should be supported by government grants or loans versus 6% who say lawyers should help small businesses pursue legal claims

More information on the polling is available on ATRA’s website. For information on the principles the broader insurance industry have put forth for a government-backed pandemic policy solution, click here.

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U.K. Supreme Court Ruling On BI Is Not Relevant To U.S. Litigation, Insurance Expert Affirms

On January 15, the U.K. Supreme Court released a ruling in favor of policyholders for a business interruption (BI) test case appeal, providing clarity on some key contractual uncertainties for pending claims. The original case was brought by the country’s Financial Conduct Authority to the U.K. High Court on behalf of affected businesses.

While the findings of the verdict were highly anticipated by insurers and policyholders in the U.K., the ruling is not an indicator to the BI litigation landscape in the U.S., according to Insurance Information Institute (Triple-I) CEO Sean KevelighanAs reported by The Wall Street Journal, Kevelighan makes clear that “the British policies in question and typical U.S. policies have key contractual differences that would limit the applicability of the ruling.”

To date, there has been a growing list of court decisions in state courts across the U.S. in favor of insurers, affirming BI policies do not 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 and resources, go to fairinsure.org or reach out to the Triple-I for more info.

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Bloomberg Article Reaffirms Necessity Of Government-Backed Pandemic Relief

Yesterday, Bloomberg published an article on the prospects of a government-backed pandemic insurance program, providing an overview of what stakeholders around the world are doing to advance this conversation. This timely piece highlights the importance of finding such a solution, as many businesses—especially small ones—continue to face economic strains during these challenging times.
 
Key takeaways from this article include:

  • Forcing insurers to cover pandemic-related business income losses would threaten the solvency of the insurance industry. “At the core is the reality that the global non-life insurance industry’s $2 trillion in capital won’t last in a ‘black swan’ event, such as a cyber attack or another pandemic, that hobbles the global economy.”
     
  • Given the scale of a pandemic, only the government has the financial capacity to cover such a risk, as insurers brace for greater climate change risks. “Anything as large as pandemic risk, the industry argues, will need government support. The coronavirus has shut down global economies in a way that very few prepared for, with revenue for millions of businesses cut or totally lost as they were forced to shut their doors. But it’s far from the only possible threat.”
     
  • Stakeholders—including policymakers and stakeholders—have been pushing for governmental action through policy proposals. “Lawmakers in the U.K., the European Union and the U.S. are grappling with ways for taxpayers to help in a more predictable way than hastily assembled bailouts. Insurance giants including Chubb Ltd., Axa SA and Lloyd’s of London are pushing for action before the lessons of 2020 fade.”

If interested, the article can be found here. For more information and resources, go to fairinsure.org.

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Iowa Federal Court Affirms Insurers’ Position In A Business Interruption Case Ruling

The U.S. District Court for the Southern District of Iowa ruled in favor of the insurer in a lawsuit on pandemic-related business interruption (BI) claims due to lack of alleged physical property loss or damage that would trigger coverage.
 
According to Judge John A. Jarvey:

  • Direct physical loss necessitates tangible alteration of property, not the loss of use of property due to mandatory closures. “The closure orders amounted to a direct physical loss because they were prevented from doing normal business, [plaintiffs] said. Jarvey rejected this theory. ‘It is a settled matter in Iowa law that direct physical loss or damage requires tangible alteration of property and that loss of use alone is insufficient,’ he said.”
     
  • The virus exclusion in policyholders’ BI policy clearly prohibits coverage, even if statewide shutdown orders cause physical damage. “This virus exclusion lets [insurer] off the hook even if the [plaintiffs] could show that Covid-19 or statewide shutdown orders actually altered their property, he said. ‘The Virus Exclusion unambiguously states it will not pay for loss or damage that is directly or indirectly caused by any virus, regardless of any other cause or event that contributes to the loss.'”

This lawsuit is part of a nationwide litigation trend we’ve seen in recent months, led by trial attorneys, attempting to retroactively alter BI contracts to cover pandemic-related income losses—a misguided effort that places the interests of attorneys ahead of business owners’ and jeopardizes insurers’ ability to meet promises to policyholders on covered claims. The Iowa ruling adds to the growing list of favorable rulings affirming insurers’ position that global pandemic risks are uninsurable.
 
The full article is available here. For more information and resources, visit fairinsure.org

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Houston Small Biz Owners On Resilience & Recovery

new post on the Triple-I’s Resilience Blog shares the story of small business owners Bobby and Janice Jucker, who have nicknamed themselves the King and Queen of Disasters. Their business, Three Brothers Bakery, has weathered Hurricane Harvey, several floods, a fire, and now COVID-19. 

COVID-19 is the toughest disaster they have ever faced, but the Juckers’ unique and tough experiences with tragedies have given them special perspective. They offer several good pieces of advice in the blog post, including navigating the insurance market and knowing your business’ policy well. 

You can read the full profile on bakery owners Bobby and Janice Jucker here and watch their four-part business plan for disaster recovery here. For more information and resources, visit fairinsure.org

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A Federal Court May Have Just Turned Missouri Into A Hotbed For COVID-19 Litigation, American Tort Reform Association President Says

The president of the American Tort Reform Association (ATRA) Sherman “Tiger” Joyce recently published an op-ed outlining a dangerous ruling in a Missouri court regarding business interruption (BI) COVID-19 claims. The outlier decision in favor of policyholders fails to take into account that BI policies are generally triggered by physical property damage, which COVID-19 has been shown not to cause directly. 

As the last few months have made clear, global pandemics are uninsurable. Rulings like the one in Missouri, as well as trial lawyers’ bad faith litigation against insurers, are a distraction from what is really needed during this crisis: a federal solution to help struggling businesses as they look to survive and eventually recover from this pandemic. 

Key highlights from the piece include:

  • Business interruption insurance is designed to cover losses caused by physical damage to property, not a reduction in services or viral contamination. In fact, “Judge Bough’s decision is an outlier, completely out of step with the essential function of business interruption insurance and outside the scope of policy coverage.” 
     
  • In his ruling, the judge cited a previous decision that he himself had written as justification for the later ruling. “This is judicial activism at its worst. And given Bough’s status as a federal judge, his interpretation of Missouri law and insurance agreements can serve as a precedent for other Missouri judges to follow.”
     
  • More importantly, the ruling played right into trial lawyers’ hands. “Not only did the court reinterpret an insurance policy to fit its own narrative, but it also created an opportunity for unscrupulous trial attorneys to flood the state’s civil court system with countless meritless lawsuits.”

For more information, visit fairinsure.org.

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Fully Federally Funded, Affordable Solution To Pandemic Relief Is Needed To Protect Main Street Businesses

Protecting Main Street businesses from future pandemics will require a fully federally funded, affordable base layer of coverage, writes David Sampson of the American Property Casualty Insurance Association (APCIA), Charles Chamness of the National Association of Mutual Insurance Companies (NAMIC), and Bob Rusbuldt of the Independent Insurance Agents & Brokers of America (IIABA) in a new op-ed for Morning Consult.

Here are a few highlights from the article:

  • The time to discuss insurance solutions to future pandemics is now. “While more financial assistance is needed in the short term, policymakers and the business community also need to establish a program to provide financial protection for businesses from future viral outbreaks and pandemics.”

  • Insurers are committed to finding risk solutions for customers, but pandemic risks defy insurability. “Private insurance is built on the premise that a small percentage of those paying in for a given year will experience a loss, and the universal nature of a pandemic makes it, by definition, uninsurable. Insurers do not have the scale or ability to adjust tens or hundreds of millions of simultaneous, complex insurance claims.”

  • The federal government’s involvement is key to helping all businesses recover and re-open. “Forcing insurers to absorb the losses for an inherently uninsurable risk, even at just a percentage of the losses, would be unaffordable for most businesses, particularly on Main Street… It is critical that Congress enacts a program that works for all stakeholders, large and small, and provides the economic security that our country needs.”

The insurance industry experts from APCIA, IIABA, and NAMIC also highlighted the Business Continuity Protection Program (BCPP), which, along with the Pandemic Risk Insurance Act (PRIA) and the Pandemic Business Interruption Program, is one of few proposed policies for federally funded pandemic relief. Read more on the industry’s recommended principles for proposed policies here.

You can read the full op-ed here. For more information and resources, visit fairinsure.org.

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House Financial Services Hearing On Pandemic Insurance Emphasized Need For Pandemic Risk Planning

Today, the U.S. House Committee on Financial Services’ Subcommittee on Housing, Community Development and Insurance held a virtual hearing titled “Insuring Against a Pandemic: Challenges and Solutions for Policyholders and Insurers.” 

With testimony from a variety of stakeholders from insurance, to retail, to think tanks, the hearing reinforced the need for a federal-level discussion on insuring against pandemic losses, as well as introducing viable solutions to protect both policyholders and insurers. As witnesses pointed out, insurers are unable to plan for and cover massive losses associated with global pandemics, and only the federal government has the financial capacity to support struggling businesses during a crisis of this magnitude. 

Below are some key highlights from today’s hearing:

  • Representative Trey Hollingsworth (R-IN-9) highlighted the importance of upholding American economic principles and basic contract law, saying that “forcing insurers to pay out claims for which they did not collect premiums retroactively” is not a solution, but instead, the “rewriting of tens of thousands of contracts across this country, ripping apart the very basis of contract law which has underpinned our free market economy for 240 years.” 

  • In his opening statement, Senior Corporate Counsel for Shelter Insurance, Brian Kuhlmann emphasized that pandemics are uninsurable. He explained that insurance works best when the accidental losses of a few can be broadly spread. Yet, “where losses are catastrophic, unconstrained by geography, across the entire economy, insurance is not always an option to be the means of the relief many need. Global pandemics fall into this category of uninsurable risks.” He added that it is clear that global pandemics do not meet the requirements for insurability, therefore, an alternative mechanism is necessary to protect businesses from future pandemics.

  • Michelle McLaughlin, chief underwriting officer of Chubb’s small business and commercial middle market divisions, reinforced that the private insurance market cannot underwrite the massive losses associated with global pandemics. She suggested that any pandemic insurance solution will require substantial involvement of the federal government and that insurers “can and should play a meaningful role in providing future pandemic risk coverage that would protect local and national economies and businesses small to large.”

  • John Doyle, President and CEO of Marsh, pointed toward the necessity of a strong and resilient U.S. economy in his testimony, and made clear that without a pandemic risk solution, the economy will not have the capacity to bounce back from COVID-19 or a future pandemic event: “[C]reating a public-private pandemic risk solution can instill confidence in businesses, accelerate our economic recovery, and provide needed protection against future pandemics. A pandemic risk insurance program is essential for all of our policyholders, no matter their size.” 

You can watch the full webcast of the hearing here. For more information, visit fairinsure.org.

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Minor League Baseball Teams’ Lawsuit Dismissed By Federal Judge

Last week, Judge Douglas L. Rayes dismissed a lawsuit filed by a group of Minor League Baseball teams against their insurers, rejecting the teams’ assertion that their insurers cannot enforce the virus exclusions in their contracts.

In their lawsuit, the group of baseball teams cited certain circumstances related to the pandemic that stopped them from continuing business-as-usual: a lack of players, government-issued stay-at-home orders, and mandatory shutdowns. As with many standard business interruption contracts in the U.S., these contracts have virus exclusions. Consequently, insurers cannot be held responsible for coronavirus-related losses. 

This latest decision continues to underscore the fact that global pandemics are not insurable. There are at least two more still-pending lawsuits involving Minor League Baseball clubs suing their insurers over business interruption claims. 

You can access the full Bloomberg Law article on the decision here.

For more resources and information, visit fairinsure.org.

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Global Pandemics Are Uninsurable, New Research Finds

Insurers would need to collect business interruption insurance premiums for 150 years to absorb losses caused by the COVID-19 pandemic, according to insurance experts at the global insurance research group, The Geneva Association and researchers at the University of St. Gallen.

The new report on the insurability of pandemic risk offers a quantitative assessment of the protection gap—the share of uninsured losses in total economic losses—in business continuity that the pandemic exposed. Key findings include:

  • Pandemic-related business losses are not privately insurable. “The property & casualty insurance industry, which collects USD 1.6 trillion in premiums per year for all policies – and a mere USD 30 billion for business interruption risk – is not the right vehicle for shouldering the projected global loss in GDP for 2020 of USD 4.5 trillion.” 
  • Forcing insurers to underwrite all of the economic losses associated with the pandemic threatens the entire sector’s solvency. “The mismatch between the insurance sector’s current levels of capital, on the one hand, and the probability and exposure levels of pandemic risk, on the other, would impose a material solvency risk on the industry, as well as create a potential financial stability threat.”
  • Governments have a responsibility to involve themselves in closing the protection gap. “Systemic pandemic economic and business continuity risk cannot be treated in the same way as other (catastrophic) risks. Government and society must accept this distinction when setting their expectations for the role of the insurance industry in addressing this issue in future.”

As Walter R. Stahel, expert in sustainable policy and former Head of Risk Management Research at The Geneva Association, wrote nearly two decades ago, “risks that can be insured need not be ‘legislated’; uninsurable risks, however, have to be dealt with by nation states.” Governments and insurers must think and agree upon feasible solutions to better protect society from extreme risks, the report concludes.

Read the full report here.

For more information and resources, visit fairinsure.org.