Yesterday's announcement of a new lawsuit from plaintiffs attorneys pits minor league baseball franchises against their insurers and marks another misguided attempt to force business interruption policies to retroactively cover uninsured pandemic claims.
As industry experts and early court decisions have emphasized, business interruption claims require physical damage. Below are some expert perspectives to consider:
- Losses resulting from a pandemic were never intended to be covered by business interruption policy, considering the scale of such an event. "Business interruption coverage due to a virus outbreak has been excluded from standard policies issued to business owners across the insurance industry for quite some time," said Ryan Ankrom, a spokesman for Nationwide Mutual Insurance Co., which insures some of the teams. "The risk for such an event is so vast, including it in standard coverage would make such coverage unaffordable or even unavailable."
- Forcing insurers to cover losses from a pandemic would jeopardize the solvency of the insurance industry, making it impossible to meet the covered needs of policyholders. "Companies with 100 employees or fewer could see losses of as much as $431 billion a month, the American Property Casualty Insurance Association estimated without breaking down how much would be covered by insurance," reported Bloomberg Government. "That's nine times as much as the $47 billion the industry said it paid for covered losses from the 9/11 terrorist attacks, when only a third of claims were for business interruption, according to the Insurance Information Institute."
- A New York federal court ruled against a preliminary injunction request to require an insurer to pay for the plaintiff's losses from the pandemic, affirming viruses are not a form of direct physical damage—a requirement for BI coverage. "New York law is clear that this kind of business interruption needs some damage to the property to prohibit you from going. You get an A for effort, you get a gold star for creativity, but this is not what’s covered under these insurance policies."
- The National Association of Insurance Commissioners noted that business interruption policies are not "priced or designed" to cover claims in a pandemic: "Business interruption policies were generally not designed or priced to provide coverage against communicable diseases, such as COVID-19 and therefore include exclusions for that risk. Insurance works well and remains affordable when a relatively small number of claims are spread across a broader group, and therefore it is not typically well suited for a global pandemic where virtually every policyholder suffers significant losses at the same time for an extended period." 3/25/20
- In an April 2020 letter, Sens. Scott, Crapo, Tillis, Rounds, Toomey, Sasse, and Perdue explained the consequence of forcing insurers to pay uncovered pandemic claims: "If the insurance industry were now forced retroactively to cover perils that were never accounted for, commercial insurers could experience significant economic strain and/or insolvencies, given the magnitude of the current cumulative estimated claims. Adding another point of stress during these times, this would likely put our businesses in an even worse position - draining the U.S. insurance reserves to pay these claims could leave us in a position of having inadequate reserves to cover claims that are actually intended to be covered, such as damage from wind, fire, hail, and other covered perils."
Only the federal government has the financial capacity to provide the critical relief that businesses and minor league baseball clubs need now and to protect them from similar events in the future.
For more information and resources, go to fairinsure.org.