‘Pandemic insurance’ could be new norm

Nobody was interested in socalled “pandemic insurance” prior to 2020.

Will coronavirus lead it to become the new norm?

As many business owners are well aware by now, insurance claims related to COVID-19 closures are likely to be denied.

Traditional property insurance policies cover only business interruption losses tied to physical damage — some explicitly exclude viral disruptions.

Meanwhile, insurance brokers are skeptical proposed legislation or civil lawsuits will ever successfully compel the industry to pay out such claims.

And owners looking for ways to shield their businesses from future losses or potential legal issues as a result of the disease won’t find much help from insurers, either. Yet. “It’s a wait-and-see thing for us,” said Dave Gallen, president of Gallen Insurance in Cumru Township. “Insurance policies are forever evolving. It’s new territory moving forward for everybody involved.”

Pandemic insurance exists

In 2018, a partnership between insurance broker Marsh, reinsurer Munich Re and biorisk management agency Metabiota produced the world’s first known commercial insurance policy covering losses resulting from pandemics.

According to a report by Insurance Journal, there were no confirmed purchases of the policy called PathogenRX.

Since the COVID-19 outbreak struck the U.S., more companies are bringing similar products to market.

However, despite widespread economic devastation caused by the disease, highly specific disaster policies tend to get dropped once customers view the threat as remote.

So even if businesses decide to start buying pandemic insurance now, it may not be here to stay.

“What happens is they start paying for it, then down the road, people ask why they’re paying for it,” said Gallen. “It’s cyclical.”

File a claim anyway

Of course, it’s too late to purchase pandemic insurance to cover losses from COVID-19 anyway.

Still, brokers like Gallen recommend filing a business interruption claim regardless.

“We’re encouraging people to file claims because it’s not my position to tell someone, ‘No,’” said Gallen. “If they’re calling, we’re letting the insurance carriers handle it.”

Some carriers report paying a small number of claims, so while perhaps improbable, it’s not impossible.

“Where the insurance carriers are hanging their hat is the policy says, “direct physical loss,” said Gallen.

“What some attorneys are trying to fight is, if COVID gets into my office or building, that’s a physical loss. They’re trying to, not skew it, but end-around it.”

Legal fights ahead

A number of class action lawsuits are springing up as a result of carriers’ refusal to pay claims related to the virus.

Several states, including Pennsylvania and New Jersey, also proposed new legislation that would force insurers to retroactively provide limited business interruption coverage to certain small businesses.

Even if the laws passed, court battles certainly lie ahead, according to an explainer on the website of the insurance agency Graham Company, which has offices in Philadelphia, New York and Washington, D.C.

“These laws would most certainly face constitutional challenges from insurers and trade groups, arguing that they directly violate constitutional contracts’ clauses, which would take years in the court system to resolve,” reads the statement.

Gallen doesn’t believe lawsuits or legislation will overturn binding contracts and years of precedent, either.

“I don’t see it happening,” said Gallen. “Policies have been that way for as long as I’ve been in the business, so for 30 years.”

Any help on the way?

What alternative agencies like Graham Company are proposing instead is a federal “recovery fund,” modeled after the 9/11 Victims Compensation Fund.

The idea is supported by The Council of Insurance Agents and Brokers, for which Graham Company president Ken Ewell serves on the board of directors.

“The relief would be tied to requirements to keep employees on the payroll, maintain worker benefits and meet financial obligations,” reads the website.

“The payments through the Fund would be grants, not loans, to stabilize the balance sheets of eligible impacted businesses and not add additional debt obligations to these businesses.”

However, there is not a lot of optimism for another financial stimulus package in Congress at this precise moment in time.

Whatever happens, the responsibility of making businesses whole in a pandemic isn’t likely to fall in insurers.

Afterall,aretheysupposedtounderwrite the entire U.S. economy?

Dave Gallen of Gallen Insurance in Cumru Township.