Category Archives: Business Insurance

Business Insurance, Health & Safety, Insurers and the Economy, Legal Environment, Workers Compensation

Gauging Pandemic’s Impact on Insurers

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While COVID-19’s impact on the insurance industry will require time to fully understand, litigation, legislation, and concerns about pricing and policy language will be with us for some time to come.

“Significant” changes in policy language seen

The majority of respondents to an Artemis re/insurance market survey believe the COVID-19 pandemic will result in “significant changes” to business interruption (BI) policy wordings.

In fact,  the U.K. Financial Conduct Authority (FCA) is conducting a review focused on obtaining legal clarity on policies connected to the pandemic and which claims are valid and which aren’t.

FCA’s Interim CEO Chris Woolard said recently that while some BI policies are paying out for virus-related issues, others remain “within dispute” due to ambiguities in their wordings.

Outside of the 67.6% who stated a belief that COVID-19 will drive “significant changes” in BI policy wordings, 21.6% expect a “moderate amount” of change, while the remaining 10.8% said the effect will be “limited.”

Loss estimates vary

The Artemis survey also shows 67% of respondents expect the industry to face between $80 billion and $100 billion of underwriting losses due to the pandemic. This is roughly in line with Lloyd’s of London’s earlier estimate of a $107 billion global industry impact.

But analysts from investment bank Berenberg said they believe global COVID-19 claims will be more manageable, estimating a range from $50 billion to $70 billion for the total bill. The analysts don’t specify whether this includes both life and non-life insurance claims from the pandemic, but they do point to the estimate from Lloyd’s of London as being too high.

“We estimate $50-70bn for global COVID-19 claims,” Berenberg’s analysts state. “Significantly less than the $107bn estimate reported by the Lloyd’s of London market estimate on 14 May.”

Las Vegas Hospitality Union Sues Employers

Las Vegas Culinary Workers Union Local 226 is suing several employers on the Las Vegas strip over unsafe working conditions during the coronavirus pandemic, Business Insurance reported.

The union, representing 60,000 workers, said in a statement it is asking for injunctive relief under the Labor-Management Relations Act based on the “hazardous working conditions” workers face.

The lawsuit alleges casino hotels have not protected workers, their families, and their community from the spread of COVID-19 and that current rules and procedures in place for responding to workers contracting COVID-19 have been “wholly and dangerously inadequate.”

The Culinary Union made a number of requests for policy changes, including daily cleaning of guest rooms, mandatory testing of all employees for COVID-19 before returning to work and regular testing thereafter, adequate personal protective equipment for workers, and a requirement that guests wear face masks in all public areas.

Best Warning on COVID-19 Workers’ Comp Laws

Insurance rating agency A.M. Best has warned that legal efforts in several U.S. states to expand workers’ compensation coverage to allow employees to claim for COVID-19 will have a negative impact on re/insurers, Reinsurance News reports.

The crisis has resulted in many employees now working from home, but a significant part of the workforce still needs to be present and public facing, and this is the group new state laws aim to support. For these workers, some states are looking to shift the burden to the insurer to prove that an employee contracting COVID-19 did not do so while on the job.

“This shift in the burden of proof could lead to significant additional losses to a segment already under pressure and result in increased reserve estimates and higher combined ratios,” A.M. Best said.

Given that assumptions used in pricing and actual loss emergence diverge significantly, these legislative changes will result in an increase in loss estimates and could affect earnings.

Businesses Ask Patrons to Waive Right to Sue

As businesses reopen across the U.S. after coronavirus shutdowns, many are requiring customers and workers to sign forms saying they won’t sue if they catch COVID-19, Associated Press reported.

Businesses fear they could be the target of litigation, even if they adhere to safety precautions from the Centers for Disease Control and Prevention and state health officials. But workers’ rights groups say the forms force employees to sign away their rights should they get sick.

So far, at least six states — Utah, North Carolina, Louisiana, Oklahoma, Arkansas and Alabama — have such limits through legislation or executive orders, and others are considering them. Business groups such as the U.S. Chamber of Commerce are lobbying for national liability protections.

Business Insurance, Insurance Industry

Pandemic Insurance Was Available. Why Didn’t Businesses Purchase It?

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By James Ballot, Senior Advisor, Strategic Communications, Triple-I

Business interruption policies generally exclude losses from closures due to virus or bacteria. Yet insurance against losses due to a pandemic like COVID-19 did in fact exist well before the first case of COVID-19 was reported in the U.S. A recent Wired article, We Can Protect the Economy From Pandemics. Why Didn’t We? gives an in-depth look at the origins and development of pandemic insurance–and why it was ignored by business owners and risk managers who potentially stood to gain the most (or lose the least) from having it.

On the surface, the article’s author recounts the sort of innovation and ingenuity that most of us familiar with insurance can easily recognize. But just beneath is a fascinating glimpse at how insurers, virologists and epidemiologists, and data scientists devised ways to understand and rationalize the economics of outbreaks—and at the amazing race to quantify and price pandemic risks to bring an insurance product to market.

“Reinsurance is sometimes called the business of a hundred professions … you don’t just have mathematicians and lawyers and businessmen. You have former mining engineers. You have former captains who steered ships across the ocean. You have art experts who are specialized in art insurance. It is, if you like, always close to life.”

–from, We Can Protect the Economy From Pandemics. Why Didn’t We?

Like many significant advances, pandemic insurance started from a conventional, even humble proposition. In 2011, with the 2008 Ebola outbreak still fresh in the collective memory, Gunther Kraut, then a young quantitative analyst at Munich Re, studied ways for his firm to hedge its life insurance portfolio against a “one-in-500-year return period.”

Kraut later partnered with Nathan Wolfe, a globetrotting rock-star virologist, and Nita Madhav, an epidemiologist who’d spent 10 years modeling catastrophes for the insurance industry, to create what was essentially a new consciousness about pandemic risk—and tools to help mitigate potentially immense losses.

Without trifling, this is a gripping saga involving global NGOs, multinational corporate giants, visionary business derring-do, and catastrophic failures of the imagination. But from its pages, we get a fuller understanding of insurance as a pervasive force that, in spite of its sophistication, ubiquity and capacity for good, nevertheless sometimes bows to the principles of behavioral economics.  

Business Insurance, Business Risk

Bad Faith and Business Income Interruption Policies During the Coronavirus Pandemic

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By Max Dorfman, Research Writer, Insurance Information Institute

A new and risky legal precedent could be set as the coronavirus pandemic continues to roil the U.S. economy. A growing number of policyholders say that insurers are acting in bad faith when they deny claims for losses sustained during shutdowns.

While business income interruption coverage typically covers physical damage to a property, some businesses believe the potential presence of the virus on their property or in their community is equivalent to physical damage.

Business income interruption exclusions for pandemics date back to the 2002-2003 SARS epidemic, when insurers realized that the risk of such a massive health crisis would be impossible to credibly quantify, and thus impossible to absorb.

In several recent articles, some plaintiffs’ attorneys have accused insurers of acting in bad faith by issuing quick denials without properly investigating their claims. “Quite frankly, the prevailing law on the insurance policies is that coverage is supposed to be interpreted broadly and exclusions are supposed to be interpreted narrowly,” said William Shernoff, a founding partner of California-based Shernoff Bidart Echeverria LLP, which specializes in representing policyholders in claims against insurance company denials. Shernoff also stated that any inconsistency in a policy means it’s ambiguous and would result in a decision favoring the plaintiffs.

Michael Menapace, an insurance lawyer and a Triple-I non-resident scholar, disagrees. “They’re trying to recast what the damage is from the policy trigger of “direct physical loss of or damage to property” to a broader concept of “loss of use,” which term does not appear in most policies. They’re also going to claim that somehow the entire insurance industry tricked policyholders by sneaking in the virus exclusion. There is a tension between the plain meaning rule [what the exclusion literally states], and the doctrine of reasonable expectations [the way someone who is not trained in the law would interpret them].” He continued, “When an insurance company denies a claim, they may get the decision wrong – but it doesn’t mean they denied it in bad faith.” Menapace adds that the virus exclusion has not been tested in the courts on any large scale since its adoption in 2006. “There’s so little case law on virus exclusions during pandemics, I have a hard time believing insurers are acting in bad faith.”

There are many reasons for the insurance industry not to act in bad faith under these circumstances. An insurer that is deemed to have acted in bad faith can be liable for damages that are greater than the policy limits, including but not limited to interest, emotional distress, consequential economic losses, attorneys’ fees and punitive damages.

Menapace also makes the point that business income interruption claims from a pandemic would rapidly deplete insurers’ reserves and surplus that are needed for covered losses such as those from hurricanes and other perils. “We can insure certain events because there is a spreading of risk,” saidMenapace. “If everyone has the same loss at the same time, like from a pandemic, we lose the fundamental aspect of insurance, which is risk spreading.”

Much depends on how the courts interpret the exclusions. “Insurers said they were not going to cover damage due to pandemics. There is going to be new law created. It depends whether the courts will read the plain meaning of the exclusion, or if they’ll interpret some of the creative arguments of the plaintiffs.” If these contracts will retroactively favor the insured, Menapace added, it could force insurers to stop covering business income interruption in any scenario, as the costs would simply be too great. And that would be truly bad for policyholders and insurers alike.

Business Insurance, Business Risk

FAQ: Riots and Business Insurance

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Riots across the U.S. and the subsequent damage to thousands of businesses have many business owners asking what their business insurance policies will cover. In this interview, Triple-I Vice President of Media Relations Loretta Worters answers some frequently asked questions about business insurance and what it covers.

Are businesses covered for property damage from riots?

Yes, they are. Business property that has been damaged by riot, civil commotion. vandalism and fire are covered under virtually all businessowners and commercial insurance property policies. This typically includes damage to windows, doors, light fixtures, store windows and plate glass on office fronts. There is also coverage for the contents of the building such as furniture, office supplies, computers or machinery that may be either damaged or stolen.

Should a business insure its building and contents at replacement value or actual cash value?

A business may have the option to insure its business property at replacement value or actual cash value. The difference is that replacement value coverage can help a business replace its property at market prices, whereas actual cash value coverage takes depreciation into account. Replacement value coverage costs more, but it also pays out more in the event of a claim.

What about loss of income?  

Businesses that are forced to suspend operations or limit hours due to rioting, vandalism or civil commotion and have coverage for the loss of income under business income insurance (also known as business interruption, or BI) do have coverage. Coverage is typically triggered if there is direct physical damage to the premises.

What if a business is unable to access its property due to a government order? If there is a curfew in place, how will that impact a business?

While insurance policies vary, typically there is business interruption coverage for civil authority orders, such as curfews (when a business has reduced hours) or when a business is unable to access its property due to a government order requiring the business to close. Such coverage nearly always requires the existence of property damage within some limited geographic radius surrounding the policyholder’s location. This often ranges from 1 to 10 miles. Typically civil authority coverage has a waiting period of 24 to 72 hours, depending on the policy, before a policyholder can begin claiming the benefits of coverage. Coverage typically lasts up to four weeks, but the time period can be extended by paying an additional premium. However, once a curfew is lifted and business can resume, coverage ceases. 

Is business income coverage subject to a deductible?

Under most policies, business income coverage is subject to either a waiting period, which acts like a form of deductible or a monetary deductible. 

How will the amount of the business income loss be determined for a business?

Under most policies, business income coverage includes both net income (the profit a business earns after expenses and allowable deductions) and the cost of continuing normal operations.

What information does a business need to support its business income claim?

Most insurers require the following:

  • Profit and Loss statements
  • Sales records
  • Income tax returns
  • Rent or mortgage statements
  • Payroll records

What if a business vehicle has been damaged in a riot?

Damage to vehicles is covered under the optional comprehensive portion of an auto policy. This provides reimbursement for damage to the vehicle and its contents caused by fire, falling objects, vandalism or riot. Comprehensive coverage also reimburses a business if the vehicle’s windshield is cracked or shattered. Some companies offer glass coverage without a deductible.

Any advice for business owners?

Know your risks! Every smart business owner recognizes that business insurance is an essential element of an overall business plan. It should be factored in with fixed operational expenses like utilities. Without adequate coverage, business owners may have to pay out-of-pocket for costly damages from a riot, hurricane or other disaster, which could spell financial ruin.

Business Insurance, Business Risk, Legal Environment

COVID-19 Wrap-Up:BI Coverage Continues to Make Headlines

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From new litigation to proposed legislation, debate over whether insurers should be required to pay for business losses related to the coronavirus pandemic remain in the news. 

Restaurants Sue Insurers Over Business Interruption Claims  

Proprietors of more than 10 restaurants, bars, and bakeries in Washington, D.C., joined a growing list of restaurateurs seeking coverage for pandemic-related damages, The Washington Post reports.   

The Post interviewed Triple-I CEO Sean Kevelighan and Triple-I non-resident scholar Michael Menapace, who explained why the suits are unreasonable and threaten the insurance industry’s solvency. 

“The insurance business works by spreading risk around so the industry isn’t hit all at once with claims,”  Kevelighan says. “A pandemic disrupts business far and wide, with no end date in sight.” 

About 40 percent of all companies have business interruption insurance, and most policies do not cover COVID-19.  If lawmakers retroactively require carriers to pay these unplanned-for claims, it could cost the insurance industry $150 billion a month, which would quickly deplete its $800 billion surplus. 

Policyholder Pulls COVID-19 Suit Against Broker, Insurer Business Insurance May 20, 2020 

Insurance Speak: Business Interruption Claims and COVID-19 Property/Casualty 360, May 20, 2020 

COVID-19 and Business Interruption Insurance – How to File a Claim the Right Way Franchising.com, May 19, 2020 

Coronavirus Pandemic Threatens Run on Business Interruption Policies Sold by Captive Insurance Risk Pools Forbes.com, May 19. 2020 

California Music Venues Sue Insurer over Business Interruption Related to COVID-19 Insurance Journal, May 15, 2020 

La. Lawmakers Scrap Business Interruption Bill

Louisiana lawmakers scrapped a bill that would have forced insurers to cover retroactive business interruption claims due to COVID-19, Business Insurance reports. 

However, state senators agreed to rewrite and amend Senate Bill 477 to allow a proposal requiring insurers to clarify exclusions on business interruption policies to move ahead. 

The scrapping of the Louisiana proposal follows last week’s decision by the Council of the District of Columbia not to go ahead with a proposal to force insurers to provide retroactive business interruption coverage on small-business COVID-19 claims. 

Coronavirus Updates in Louisiana: 35,038 COVID-19 Cases, 2,458 Deaths, WDSU 6, New Orleans, May 19, 2020 

Dozens of Workers at 3 Louisiana Crawfish Farms Test Positive for COVID-19, 4 WWL, New Orleans, May 19, 2020 

Red Flags Found at Louisiana Nursing Homes Ravaged by Coronavirus, NOLA.com, May 19, 2020 

Pa. Bill Would Define COVID-19 as Property Damage 

The Pennsylvania Senate is weighing a bill that would include losses spurred by the COVID-19 global pandemic under property and business interruption insurance coverage, Property/Casualty 360 reports. 

Senate Bill 1127 doesn’t explicitly state that insurers must cover COVID-19 business interruption claims. The bill states that if a covered property is located within a municipality where “the presence of the COVID-19 coronavirus has otherwise been detected,” that property is “deemed to have experienced property damage.” 

It also states that Gov. Tom Wolf’s March 19 emergency order to close businesses is to be considered an order of civil authority under a first-party insurance policy which limits, prohibits, or restricts access to non-life-sustaining business locations “as a direct result of physical damage at or in the immediate vicinity of those locations.”  

Coronavirus: 63,666 cases of COVID-19 in Pennsylvania, WGAL News 8, May 20, 2020 

Nursing Homes in Southeast Pa. Hit Hard By Coronavirus Deaths, New Data Shows, NBC 10 Philadelphia, May 20, 2020 

Pa. Releases Names of Nursing Homes with Coronavirus Cases, Deaths, Philadelphia Inquirer, May 19, 2020 

Pa. Supreme Court Rejects Emergent Application to Consolidate COVID-19 Business Interruption Claims JDSupra.com, May 19, 2020 

Pa. Insurance Commissioner Warns Businesses of Increased Liability Risks If Defying Coronavirus Shutdow Orders KDKA 2, Pittsburgh, May 11, 2020 

Publisher Appeals COVID-19 Ruling Denying Coverage 

A magazine publisher is appealing a federal court ruling in favor of an insurer in a coronavirus-related business interruption dispute, Business Insurance reports. 

In one of the first court rulings on the business interruption coverage issue, U.S. District Court Judge Valerie E. Caproni, in the Southern District of New York, said the policyholder’s attorney deserved “a gold star for creativity” but the loss was not covered under the policy issued by the unit of Hartford Financial Services Group Inc. 

From the Triple-I Blog

REQUIRING INSURERS TO COVER PANDEMIC-RELATED SHUTDOWNS WOULD JEOPARDIZE INDUSTRY’S SOLVENCY, EXPERTS SAY

TRIPLE-I LAUNCHES CAMPAIGN TO SUPPORT RESILIENCY OF THE ECONOMY DURING THE CORONAVIRUS PANDEMIC

WEBINAR: BUILDING RESILIENT BUSINESSES AND COMMUNITIES IN THE TIME OF COVID-19

U.S. TREASURY WEIGHS IN ON DEBATE SURROUNDING BUSINESS INTERRUPTION INSURANCE

WORKERS COMP, LIABILITY NEXT UP FOR VIRUS-RELATED INSURANCE DISPUTES

Business Insurance, Insurance Industry

Triple-I Launches Campaign To Support Resiliency Of The Economy During The Coronavirus Pandemic

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On May 18 the Insurance Information Institute (Triple-I) announced the launch of the Future of American Insurance & Reinsurance (FAIR) campaign. FAIR will focus on ensuring the insurance industry is able to sustain its longstanding role as the country’s backbone of economic growth and stability.

FAIR is being set into motion as the country seeks a pathway to economic recovery in the wake of the COVID-19 pandemic. As communities reopen and restart, insurers will play a critical role in the process, continuing to provide financial protection for the millions of Americans who depend on them for indemnification from risks they rightfully insured. Yet the industry is threatened with growing calls to retroactively alter insurance policies, cover the economic cost of widespread closures, and adjust workers’ compensation criteria, among other new developments.

Sean Kevelighan

“FAIR was created to safeguard the ability of the insurance industry to support its customers at a time when policymakers, the business community, and the general public are searching for solutions to our ongoing economic turmoil. And while we recognize the need for financial relief is severe, any attempts to make insurers retroactively responsible for a global pandemic puts the solvency of many insurers at risk,” said Sean Kevelighan, CEO, Triple-I.

“While the insurance industry has been doing its part to step up and support their communities in this time of crisis, pandemics are fundamentally uninsurable events. The federal government remains the only entity with the financial resources to help businesses recover from a systemic event of this magnitude. With the support of the public sector and the innovation of groups like insurers in the private sector, we can come together to work toward recovering from this catastrophe and build a more resilient future,” he added.

Insurance carriers are an integral part of local communities across the country, employing over 2.7 million Americans and contributing nearly $565 billion to the nation’s Gross Domestic Product (GDP) in 2018. The industry has cumulatively offered consumers more than $10 billion in premium relief on auto insurance this spring and made over $220 million in charitable donations to COVID-19-related causes.

FAIR will serve as a go-to educational resource for the media, business community, and broader public in the coming weeks and will actively engage in a variety of insurance and COVID-19-related developments across America.

For more information visit fairinsure.org and follow @FAIRInsure on Twitter.

Business Insurance, Business Risk

Business Interruption Coverage: Policy Language Rules

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Whether business interruption coverage in property policies applies to COVID-19-related losses has become one of the dominant insurance debates during this pandemic. Lawsuits have been filed – some even before insurers have denied a claim – seeking to establish that policyholders are entitled to coverage for losses sustained during the current shutdowns. 

The debate often focuses on a simple phrase in the insurance policy: “direct physical loss or damage.” Business interruption coverage can apply to losses stemming from direct physical loss or damage. Losses that didn’t come from direct physical damages aren’t covered.

Michael Menapace, Esq.
Wiggin and Dana LLP

 “A property policy may, for example, pay to repair the damage caused by a fire and may cover the loss of business during the reconstruction period,” writes Michael Menapace, a professor of insurance law at Quinnipiac University School of Law and a Triple-I Non-Resident Scholar. “But here’s the rub.  Are the business interruptions related to COVID-19 caused by physical damage to property?”

Insurers say no, arguing that “damage to property” requires structural alteration like one would find in a typical claim, where, say, a fire destroyed the interior of a building or wind damaged windows and furniture.

The virus, on the other hand, leaves no visible imprint. Left alone, it can’t survive long and, after it has perished, whatever it was attached to is as good as before. Even if some remediation is needed – like cleaning metal surfaces – insurers might argue that this is no different from cleaning dirt off a surface. They cite cases in which judges have ruled there’s no physical damage from mold if the mold can be cleaned off.

Departing from common sense

Others depart from this common-sense, legally recognized definition. Some plaintiffs’ attorneys argue that if coronavirus is not direct physical damage then insurers would not have created an exclusion for viruses in the first place. Many insurers added exclusions for losses from viruses and communicable diseases after the SARS outbreak in 2003. 

Policy language, Menapace says, controls whether COVID-19 interruptions are covered. Some policies have standard terms and exclusions, some provide “all-risk” coverage – covering loss arising from any fortuitous cause except those specifically excluded – and others are variations on these types.

“The threshold issue will be whether the insureds can prove their business losses are caused by ‘physical damage to property’,” he writes. 

In past cases, where there is direct physical loss to property – such as contaminated food that couldn’t be sold or a building rendered useless by asbestos contamination – courts have found business interruption coverage was triggered. But when an earthquake caused a power loss in two factories, courts found the only injury was a shutdown of manufacturing operations that didn’t constitute “direct physical loss or damage.” 

What About Current Claims?

Are business interruptions related to COVID-19 the result of the government restrictions, or are they due to the physical loss to their property?  Menapace writes that many of the current claims would seem not to trigger the standard coverage in a commercial business interruption policy, but he cautions that this might not always be the case.

A true “all-risk policy,” he writes, “generally would not distinguish between business interruption losses due to government action or direct physical loss because all-risk policies cover all losses except those specifically excluded.”

But most commercial property policies aren’t true “all-risk policies”; instead, they typically cover business interruption losses “caused by direct physical damage to property” at or near the insured premises. 

“That will be difficult burden for policyholders to meet,” Menapace says.

Some policies exclude coverage for losses resulting from mold, fungi, or bacteria.  Because COVID-19 is a virus, that exclusion might not apply. Other policies exclude viruses, diseases, or pandemics. 

“If a policyholder believes it may have a claim,” Menapace advises, “it should provide prompt notice to its insurer(s) so it does not risk a denial based on late notice. Likewise, once the claim has been made, it is essential that the insured cooperate with the insurer, including providing timely proof of loss.”

Resources:

Business Income (Interruption): Key Facts

The True Cost of Rewriting Business Income (Interruption) Policies

Triple-I Briefing: Surplus Is Key to Insurers Keeping Policyholder PromisesISO Excluded Coronavirus Coverage 15 Years Ago

Business Insurance, Business Risk, Insurance Industry

A Toast to Marine Insurance!

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By John Novaria, Managing Director, Amplify

When you think of winemaking, you picture grapes on the vine and a hearty glass of red on your table. But you probably don’t think of all the steps involved in the production of wine and the fact that those grapes – and later, the finished product – travel long distances to reach our palates.

That’s where marine insurance comes in: to protect businesses along the supply chain from the unexpected.

The American Institute of Marine Underwriters (AIMU) drew a robust crowd to its recent webinar, “From Vine to Wine and the Fire In Between,” where participants learned of the risks associated with wine production and the coverages that are designed to mitigate losses. The two-hour session is part of AIMU’s extensive and popular educational series, and drew a crowd of underwriters, claims experts and brokers from the ranks of marine insurers and beyond.

“One of the biggest roles we perform is education, and it’s not limited to our members,” says John Miklus, President of AIMU. “Marine touches so many aspects of business that there’s a real thirst for knowledge in the broader insurance community and we try to quench that thirst.”

Pamela Schultz, Jonathan Thames and Erik Kowalewsky of Hinshaw & Culbertson opened by discussing the effects of the 2017 wildfires on the Napa and Sonoma wine growers and wineries, where 10 percent of the harvest was still on the vine when the fires started.

There are nearly 20 steps involved in wine production, including include growing, harvesting, fermenting, storage, barreling, aging, blending, bottling, labeling and distributing. Each presents opportunities for things to go wrong.

Thames explained that Stock Throughput is a form of marine coverage that insures goods in all their physical states along the supply chain with the exception of damage caused by the processes of turning the raw materials into the finished products. He said policies are generally very broadly worded and cover all risks.

Schultz pointed out how marine insurance comes into play during shipment. Stock Throughput policies are designed to cover supply chains and anything that moves inventory against loss due to:

  • Extreme weather and natural disasters can cause supply chain interruptions and even loss of product.
  • Transportation: Obviously, wine has to get from the vineyard to the table and that table may be anywhere in the world.
  • Trade problems/disruption: This affects imports and exports, especially delays due to current COVID-19 crisis.
  • Lack of Control: Products are sometimes shipped long distances, and it’s difficult to know everything about every link of the supply or travel chain.
  • Invaders: Yes, pests have been known to get into wine and cause damage and so can fumigation.
  • CTL: Constructive Total Loss becomes an issue if the wine is stolen. Most policies exclude consumption of wine, but Schultz said that hasn’t stopped some insureds from trying to claim it on that basis.

The 2017 California wildfires brought into focus the issue of smoke taint. The smoke that lingers for weeks after the fires are extinguished can taint the grapes, rendering a wine unpalatable, or worse, undrinkable.

Thames noted that smoke taint claims don’t arise until after fermentation, after the wine has been tasted, and the grower must prove damage with scientific evidence and serve notice of potential loss within 60 days. However, he said there are cost effective processes winemakers can put in place beforehand to mitigate the effect.

The presenters discussed the difference between crop insurance and whole farm revenue protection, both of which offer only limited protection to the grower. Crop insurance is not a 100 percent indemnity product; it only covers the grapes pre-harvest, so there will always be a gap. Limits are based on past yields so it’s difficult to expand limits in the first few years.

As a result of the 2017 fires in Oregon, one winemaker now requires its growers to carry crop insurance and pays half the premium.

Whole farm revenue protection insures against lost revenue, but doesn’t protect particular crops as it is not a property policy. To make a claim on this policy the insured must establish that farm revenue is down as a result of the winery rejecting the grapes.

Participants were invited to vote on their favorite wine, and the overwhelming choice was Red, at 70 percent. White garnered 17 percent of the vote and Rose 12 percent.

Upcoming AIMU courses include Yacht Insurance Fundamentals, which offers 6 CE credits, and Introduction to Static Risk Insurance: Warehouse Basics, offering 3 credits.

Auto Insurance, Business Insurance, Business Risk, Health & Safety, Insurers and the Economy, Legal Environment, Regulation, Risk Management, Workers Compensation

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/27/2020)

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Accounting Rules
NAIC Working Group Approves Flexible COVID-19 Accounting Rules
Automobile Insurance
How the Coronavirus Could Change U.S. Personal Auto Insurance
Business Interruption
Travelers, Insured Law Firm Spar Over Civil Authority Business Income Loss Claim
States Seek to Force Insurance Companies to Pay Those With Business Interruption Policies
Covid-19 Business Interruption Existential Threat, Reinsurance Capital Availability Key: Willis Re
Credit Insurance
Governments should backstop trade credit
Litigation
The Race Is on to Lead Business Interruption Insurance Litigation
What Won’t Cure Corona: Lawsuits
6 Types Of Employment Lawsuits To Expect In The Wake Of COVID-19
Editorial: Stopping a Lawsuit Epidemic
Kudlow: Businesses shouldn’t be held liable for employees and customers getting coronavirus
Corporate America Seeks Legal Protection for When Coronavirus Lockedowns Lift
Profits & Losses
Coronavirus Costs Weigh on Travelers’ Profit
Coronavirus Will Be Largest Event in Insurance History, Says Chubb CEO
Coronavirus To Be Largest Industry Loss Ever: Chubb’s Greenberg & Lloyd’s Neal
Covid-19 P&C Insurance Industry Loss Estimated $40bn – $80bn: Dowling
Chubb Classifies Covid-19 as a Catastrophe Event
Covid-19 Claims Manageable, But Reinsurers Face Formidable Challenges: Willis Re
Specialty Lines
Companies Can Expect Higher D&O Rates, Lower Limits: Experts
Lack of Adequate Insurance Puts Healthcare Workers At Risk of Malpractice Lawsuits
Workers Compensation
States Easing Path to Workers Compensation Benefits for Coronavirus Workers
Changing Virus Guidance Creates Balancing Act For Essential Employers
Employers Pushing Back as States Expand Work Comp to Cover COVID-19
Workplace Safety For COVID-19 Essential Workers
From the Triple-I Blog:
TRIPLE-I CEO AMONG PANELISTS DISCUSSING BUSINESS INTERRUPTION INSURANCE LEGISLATION
INSURERS RESPOND TO COVID-19 (4/24/2020)
CORONAVIRUS WRAP-UP: LIFE AND HEALTH INSURANCE (4/22/2020)
CORONAVIRUS WRAP-UP: DATA AND VISUALIZATIONS (4/20/2020)
Business Insurance, Business Risk, Insurers and the Economy

Triple-I CEO Among Panelists Discussing Business Interruption Insurance Legislation

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Sean Kevelighan

Triple-I CEO Sean Kevelighan today joined legislators and legal experts to discuss proposed measures that could retroactively rewrite business interruption insurance policies.

“The insurance industry is applying forward-thinking solutions to take care of its customers, communities, and employees during the COVID-19 crisis,” Kevelighan said, citing more than $10 billion so far returned to customers through premium relief; $200 million in charitable donations; and insurers pledging not to lay off employees during the crisis and implementing innovative solutions to conduct daily operations while respecting social distancing. “We’re deeply engaged in mitigating the economic impact of this pandemic.”

But the industry can only do these things – while keeping its promises to policyholders and preparing for impending catastrophes – if policyholder surplus isn’t eliminated, as it could be if some of the proposed legislative “solutions” were enacted.

Legislation has been discussed or introduced in Louisiana, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and South Carolina that would retroactively enact business interruption coverage into existing policies despite an absence of the physical damage required in property policies and/or express exclusions for communicable diseases in those policies.

Kevelighan explained how policyholder surplus provides a cushion that enables insurers to meet their obligations, even when large, unexpected catastrophes occur. He showed how retroactively rewriting insurance contracts could make it impossible for insurers to play their critical role as “financial first responders.”

The scenarios he discussed could cost the industry $150 billion and $380 billion per month – “quickly eliminating the surplus it has taken the industry centuries to accumulate.”

And they would do this in the midst of a tornado season that is shaping up to be the deadliest in eight years and as a “more active than normal” hurricane season approaches.

Kevelighan made his remarks during a webinar sponsored by the National Council of Insurance Legislators (NCOIL) and the Rutgers Center for Risk and Responsibility at Rutgers Law School. Other panelists included NCOIL President and Indiana Rep. Matt Lehman; New Jersey Assemblyman Lou Greenwald; and Jay Feinman and Adam Scales, Professors of Law at Rutgers Law School and Co-Directors of the Rutgers Center for Risk and Responsibility.

The panelists all expressed support for the creation of a COVID-19 Business Interruption and Cancellation Claims Fund, similar to the 9/11 Victims Compensation Fund enacted by Congress in 2001, for businesses suffering from costs related to the interruption of their businesses, as well as the many associations that have had to cancel events. Funded by the federal government and operated by a special federal administrator, it would facilitate distribution of federal funds and liquidity to impacted businesses during this time of incalculable business interruption.

Click here to view the presentation.