Coronavirus and Insurance

Posted in: Commercial Insurance, COVID-19

As of late, all risk management professionals have been engaging in challenging conversations with their clients. The unfortunate truth is that the insurance industry never anticipated a major outbreak like the Coronavirus, and therefore, has not drafted any commercial insurance policy to provide specific coverage for this scenario. We are in uncharted territory. At the moment, it is unlikely there will be any major relief provided by insurance policies without strong governmental intervention.

At its very basic level, the risk is uninsurable

Two tenets paramount to underwriting risk include frequency and severity. An insurer cannot quantify these factors for a given risk, then that scenario does not meet the definition of insurance and is not insurable. Any such uninsurable risk becomes a gamble or a game of chance due to its unpredictability.

We believe as claims are submitted and insurance companies are challenged, the industry leaders will argue that companies never intended to cover such losses, and to avoid future court challenges, more carriers will design more specific exclusions. We have seen this happen in the past with exclusions for War, Nuclear Hazard, Flood, Terrorism, and even Sexual Abuse. Most companies already have exclusions for Virus in the Property and Business Interruption policies, many reading: “We will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness, or disease.”

We are following the response of the world’s insurance carriers and our governments and will be here to respond if the industry is able to or is forced to begin covering such losses. For questions or assistance, please reach out to your designated PSA team member or click here to contact us.

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