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Why Don't I Have Any Coverage For This?


These are the words insurance agents hate the most.

Insurance companies . . . well, they would never admit to LOVING these words and let's not accuse anyone of delighting in another's misfortune outside the realm of Twitter and politics. But, your insurance carrier is feeling relieved right now for not holding the bag for the TRILLION DOLLAR ECONOMIC CATACLYSMIC we are experiencing.

Just like a beloved canine companion WANTS to fetch the bone for his master. Your friendly neighborhood insurance agent WANTS to find coverage for his customer. Yes, I just compared myself to a dog and I am good with it. I like dogs. Finding coverage is what we are about. Indeed, it give us pleasure in an insurance nerd sort of way. There is joy and satisfaction in knowing that you brokered a financial instrument that will rebuild someone's home, pay for their cancer treatment, send their kids to college after an untimely death, or help a business survive a fatal accident or existential threat of a lawsuit.

Thirty days ago, the number one issue facing business owners in Texas was how they would find enough labor to complete their jobs and staff their stores. Today, there are no customers in those stores and the workers are at home with their kids trying make it through the quarantine without killing one of them or becoming a drunkard. If you are not awed by how fast the pendulum has swung in the other direction; God bless you, but you are not paying attention.

To the extent there is insurance coverage to be found for the business interruption losses due to this COVID-19 outbreak, no stone will be unturned. But, short of an act by a state legislature retroactively creating coverage or the fancy of a frisky activist judge (with the full backing of a state supreme court) we have yet to find a way. But, don't take our insurance nerd's word for it (this guy). Take it from IRMI (basically, the Vulcan Academy of insurance nerds):

Since the stakes are so high, there is no doubt that arguments will be made in favor of finding coverage for business income loss due to the coronavirus under commercial property policies that provide business income coverage. In fact, at least one lawsuit seeking coverage for business income loss due to the coronavirus under a commercial property insurance policy has already been filed (Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd's London, et al., Civil District Court for the Parish of Orleans, Louisiana). Others are likely to follow. These arguments have a better chance of success with respect to coverage under those commercial property polices that do not contain an explicit exclusion of loss due to a virus. But the requirement of direct physical loss or damage is also a serious impediment to any finding of coverage under a standard commercial property policy.

Read the whole article here. It tracks with what we offered on this space previously and before these shut downs started occurring en masse. This is your basic black swan. The only viruses we have been discussing with customers for the past several years were computer viruses (which are even more active now, by the way). But, it's not like there was any coverage for it you could buy in January. As IRMI explains again:

Most standard commercial property policies include the "exclusion of loss due to virus or bacteria" endorsement (CP 01 40). This endorsement expressly excludes "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." It applies to "coverage under all forms and endorsement that comprise this coverage part or policy, including but not limited to forms or endorsements that cover property damage to buildings or personal property and forms or endorsements that cover business income, extra expense or action of civil authority." Therefore, even if coverage was otherwise triggered under the insuring agreement, this endorsement will most likely exclude any damages due to the coronavirus.

Nor will we be able to offer any coverage for this anytime soon! How do you create an insurance product for a pandemic? Insurance requires spreading the risk. I can insure your house and the houses of 99 other people against fire because I know they will not all burn at the same time. That's not true with a PAN-demic. It is literally what the word means - the prefix PAN comes from the Greek meaning "all," "of everything." What premium do you charge for an occurrence that will happen to everyone at the same time?

Our hope is that we learn from this event and we are better able to respond next time both in controlling the outbreak and limiting the impact of the response. Right now, your friendly neighborhood insurance agent is just looking for a bone to fetch and praying his master will see fit to keep him in the house.


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