Insurance

The Waves Of COVID-19 Insurance Claims

In possibly interesting news to the small portion of humanity that is really excited about insurance...

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I usually steer far away from insurance issues in this column. Those issues don’t interest a general readership, and the issues strike many people as dull.  (The issues also cut a little close to the bone for me, given my employer, so saying anything about insurance issues is a tad personally dangerous.)

But I heard something interesting about insurance last week that I just had to share with you: Some European insurance companies are now seeing fewer automobile insurance claims than at any time since World War II.

(On second thought, maybe my definition of  “interesting” and yours don’t match up precisely.)

That gives you an idea of what the pandemic has done to travel across a big swath of the world.

As long as I’ve mentioned the word “insurance,” I’ll simply recite the waves of claims that are occurring, or are expected to occur, in the insurance industry as a result of COVID-19.

Travel: This wave has largely come and gone. It’s claims under travel insurance policies for canceled trips.

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Property and business interruption claims: These claims are embryonic.  Many claims for business interruption insurance are just now being adjusted, because no one yet knows the full extent of business interruption loss. But the fight over this insurance is just getting started.

The primary dispute is this: Much business interruption coverage is triggered only by “property damage.” (The earthquake destroys your manufacturing plant. How much business interruption did you suffer as a result of your plant being out of commission?) Policyholders and insurers have different positions on whether the presence of a virus constitutes “property damage.” Given the amounts in dispute, there will of course be a gazillion subsidiary issues, but that’s enough to let you mention this at a particularly boring virtual cocktail party.

All three branches of government are involved in this dispute: The judiciary is interested, because lawsuits have been filed. Legislatures are considering laws that would compel insurers to pay COVID-19 business interruption losses even if the losses are technically not covered. And some of the executive orders implementing stay-at-home and other directives contain language that could affect these coverage issues.

That’s wave two.

The third wave will be cyber-insurance coverage. The whole world is working from home. That will result in losses. Are the losses insured?

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Then there’s employment practices liability insurance: What coverage is available as employees are furloughed or laid off?

Workers compensation: Who pays when employees become ill as they return to work?

Bankruptcy and trade credit: When companies go under, what types of coverage are available?

And finally directors’ and officers’ liability coverage: Who gets named, and who’s covered, when the inevitable shareholder litigation begins?

That’s the landscape.

I understand that all your private equity lawyers are sitting on their thumbs these days. But I’m pleased to report that your coverage counsel are about to have a very busy decade.

Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Drug and Device Product Liability Litigation Strategy (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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