Issue: Insurance & Global Pandemics

A New Orleans judge has denied a motion that would have forced an insurer to pay a business interruption (BI) claim to a restaurant closed because of COVID-19.

The case is particularly significant because it was the first known legal action filed against insurers over COVID-19 and BI. 

The motion, brought by well known class action attorney John Houghtaling II, joins a pool of nationwide rulings that have been overwhelmingly decided in favor of insurers. As in many similar cases, the ruling came down to the physical damage requirement present in most BI policies.

From Claims Journal:

Attorneys who represent insurers laid the groundwork to deny virus-related business-interruption claims early on. They argued that coverage is not triggered under commercial property policies without some tangible physical alteration to the insured property.

State and federal judges around the country have ruled in favor of insurers in motions to dismiss or for summary judgment in about four cases out of five so far.

For more information and resources, go to fairinsure.org

Attempts to force insurers to pay uncovered pandemic-related business interruption claims remain unsuccessful in Florida, as described by a recent article in Florida’s Business Observer:

• “Out of 29 rulings or resolutions so far in Florida, insurance firms have won all 29 cases, according to the national Covid Coverage Litigation Tracker, a University of Pennsylvania Carey Law School project.”

Quoting the Triple-I’s Mark Friedlander, the piece notes these lawsuits have failed because most policies contain virus exclusions or require physical damage to trigger a business interruption claim:

• “Industry officials say insurers have been prevailing in these cases for the simple reason that policy language doesn’t cover a pandemic-driven business shutdown. Also, about  80% of business interruption policies in the U.S. have virus exclusions, says Mark Friedlander, a spokesman for the Insurance Information Institute, a pro-insurance industry group.”
   

To read the full piece from Business Observer, click here.

Allianz Global Corporate & Specialty (AGCS) conducts annual research on the views of 2,769 industry experts in 92 countries and territories, including CEOs, risk managers, brokers, and insurance experts. The 2021 Allianz Risk Barometer identified the “Covid Trio”—business interruption, pandemic outbreaks, and cyber incidents—as 2021’s major business risks:

• Business interruption. Although Covid-19 emerged as the dominant risk last year, it only added to multiple other concerns for business interruption. This is the 8th time that business interruption has fallen as the top risk for the annual Allianz Risk Barometer report. More traditional business interruption risks like natural catastrophes, extreme weather, and fire, remain major threats for business interruption across many industries. Additionally, there is growing awareness of other risks such as political instability, violence, and terrorism. 

• Pandemic outbreaks. The 2020 Covid-19 global outbreak demonstrated that business interruption events on an extreme, global scale are real possibilities. According to expert Philip Beblo of AGCS’s global property underwriting team, “The consequences of the pandemic—wider digitalization, more remote working and the growing reliance on technology of businesses and societies—will likely heighten BI risks in coming years.”

• Cyber incidents. The world recently accelerated its trend toward remote work and digitalization as a result of the need to stay at home during the pandemic. The FBI reported that during the first wave of lockdowns in April 2020, cybercrime incidents increased by 300%. Cybercrime is estimated to cost the global economy more than $1 trillion, which is a 50% increase from two years ago. For several countries, including Brazil, France, India, Japan, and the U.S., cyber incidents are a top three risk.

The report notes that building greater resilience in business models will be key to mitigating future disruption. 

Although it’s a new year, Covid-19 and its effects are not yet in the rearview mirror. American businesses are still struggling. Policymakers have not yet executed a viable, sustainable, and inclusive government-backed solution to provide relief for the COVID-19 business interruption crisis, or established a solution for the inevitable crises of a similar caliber in our future. As the 2021 Allianz Risk Barometer indicates, the pandemic and business interruption concerns are too important for stability to dismiss. It’s essential that policymakers prioritize building resilience in 2021, and a necessary first step is a federal backstop for this pandemic and for future ones.

You can read the full report on 2021’s major business risks here.

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.