Category Archives: Business Insurance

U.K. Ruling’s Impact
on U.S. Insurance Cases: Little to None

The U.K. High Court last week issued a ruling involving business-interruption claims against policies issued by eight insurers. Jason Schupp of the Centers for Better Insurance says the ruling is a “mixed bag” for U.K. insurers and policyholders and has little relevance for their U.S. counterparts.

In the U.K. case, Schupp writes, “the fundamental theme running through the insurers’ defense was that the policies only covered localized outbreaks, not global pandemics.”

“More to the point for U.S. property/casualty insurers,” says Michael Menapace, a professor of insurance law at Quinnipiac University School of Law and a Triple-I non-resident scholar, the U.K. case involved disease coverage – “an affirmative coverage not included in most U.S. commercial property policies.”

 U.S. business interruption disputes so far have turned on two key policy features:

  • U.S. business-interruption coverage almost always requires property damage to trigger a payout.
  • Nearly all U.S. COVID-19-related court cases have involved policies that specifically exclude viruses.

“The U.K. court did not address either the question of property damage or the applicability of a virus exclusion,” Schupp writes.

As Menapace put it in a recent blog post about U.S. business-interruption cases, “Policy language controls whether COVID-19 interruptions are covered…. The threshold issue [for U.S. insurers] will be whether the insureds can prove their business losses are caused by ‘physical damage to property’.”

Small businesses share how they prep for and successfully recover from disaster

Young startup coffee cafe owener open and welcome customer. New small business owener.

September is National Preparedness Month, and this years’ theme of “Disasters Don’t Wait. Make Your Plan Today” could not be more timely as many areas of the country experience record-breaking wildfires and storms.

On September 16, the Insurance Institute for Business & Home Safety (IBHS), the Small Business Administration (SBA), and the Insurance Information Institute (Triple-I) conducted a live webinar on how to prepare for severe weather, COVID-19 interruptions, and other forms of disaster that can have significant impacts on small businesses.

A recording of the webinar is available here.

The webinar showcased two small businesses’ stories of preparation and recovery from disaster. The webinar also covered what small business loans are available after a disaster, what tools are available to help businesses prepare, and what you need to know about insurance coverage.

Alex Contreras, Director of the Office of Preparedness, Communication and Coordination in the SBA’s Office of Disaster Assistance (ODA), was the first speaker. The SBA offers low-interest disaster loans to businesses of all sizes, as well as to homeowners and renters. These loans are the primary source of federal assistance to help private property owners pay for disaster losses not covered by insurance.  Borrowers are required to obtain and maintain appropriate insurance as a condition of most loans.

The SBA can also fund disaster mitigation efforts, such as installing fire-rated roofs, elevating structures to protect from flooding or relocating out of flood zones.

Janice Jucker, co-owner at Three Brothers Bakery in Houston, TX is the  2018 Phoenix Award Winner for Outstanding Small Business Disaster Recovery. After Hurricane Harvey, the bakery had five feet of water. Thanks to a business recovery plan, the business was fully operational after six weeks.

Part of an effective recovery plan is building a recovery team that includes a restoration company (find one now, don’t wait) an accountant, a contractor, an SBA loan officer and an insurance agent. Another important recovery team member is your local lawmaker – know who they are and make sure they know you, regardless of whether you agree with their politics. They can play a key part in making sure you get what you need to recover from a disaster.

Gail Moraton, business resiliency manager at IBHS, talked about the free business continuity planning tool called OFB-EZ (Open for Business E-Z) available from the IBHS.  The first step to planning is to know your risk – both the likelihood of each type of disaster for your location and the amount of damage it could cause your business. Another step is having an up-to-date list of all your employees, vendors and other important contacts. A training exercise is also included with the planning tool.

Alison Bishop, internal operations manager at Spry Health Inc., talked about her company’s use of OFB-EZ. “It takes an overwhelming concept and makes it accessible and achievable,” she said.

Loretta Worters – vice president, media relations at Triple-I, went over different business insurance coverages that are available and pointed out that having the right coverage is a crucial part of disaster recovery, as well as an essential element of an overall business plan.

Like the other speakers, Ms. Worters said having a thorough inventory of all your business assets is of paramount importance. She listed different types of business policies that are available, including: property, business income interruption, extra expense, flood and civil authority. Separate coverage is also available for items that are frequently damaged in a storm, such as fences and awnings.

Click here to listen to a recording of the webinar, which offers many more useful tips for seeing your business through a disaster.

Is Your Business Ready for Disaster? National Preparedness Month Webinar

September 16, 2020 2:00 PM – 3:00 PM EDT

This year’s National Preparedness Month theme of “Disasters Don’t Wait. Make Your Plan Today” has never been more appropriate. Join the Insurance Institute for Business & Home Safety (IBHS), the Small Business Administration (SBA), and the Insurance Information Institute (Triple-I) during National Preparedness Month for a live webinar on how to prepare for severe weather, COVID-19 interruptions, and other forms of disaster that can have a significant impact on small businesses.

The webinar will showcase small businesses as they share their stories of preparing for and successfully recovering from disaster. In addition to these stories, the webinar will also cover what small business loans are available after a disaster, what tools are available to help businesses prepare, and what you need to know about insurance coverage.

SPEAKERS

Gail Moraton, CBCP – Business Resiliency Manager at IBHS

Alison Bishop, Internal Operations Manager at Spry Health, Inc. (https://spryhealth.com/)

Alejandro Contreras – Director of the Office of Preparedness, Communication and Coordination in the U.S. Small Business Administration’s (SBA) Office of Disaster Assistance (ODA)

Janice Jucker – Co-Owner at Three Brothers Bakery, Houston, TX – 2018 Phoenix Award Winner for Outstanding Small Business Disaster Recovery (https://3brothersbakery.com/)

Loretta Worters – Vice President, Media Relations at Triple-I

From hurricanes to wildfire, tomorrow’s webinar with IBHS, Triple-I and Small Business Administration will cover all disasters and how you can prepare your business.

Register now at: http://bit.ly/npm-webinar

Policyholder Surplus Matters: Here’s Why

Perhaps the most emotionally compelling data point invoked by those who would compel insurers – through litigation and legislation – to pay business-interruption claims explicitly excluded from the policies they wrote is the property/casualty insurance industry’s nearly $800 billion policyholder surplus.

 Many Americans hear “surplus” and think of a bit of cash they have stashed away for emergencies. And when you consider that nearly 40 percent of Americans surveyed by the Federal Reserve said they would either have to borrow or sell something to cover an unexpected $400 expense – or couldn’t pay it at all – that number may sound like overkill. 

Not as much as you think

But policyholder surplus isn’t a “rainy day fund.” It’s an essential part of the industry’s ability to keep the promises it makes to policyholders. And although a number like $800 billion may raise eyebrows, when we look more closely at its components, the amount available to cover claims turns out to be considerably less.

Insurers are regulated on a state-by-state basis. Regulators require them to hold a certain amount in reserve to pay claims based on each insurer’s own risk profile. The aggregation of these reserves – required by every state for every insurer doing business in those states – accounts for about half the oft-cited industry surplus.

Call it $400 billion, for simplicity’s sake.

Each company’s regulator-required surplus can be thought of as that company’s “running on empty” mark – the point at which alarms go off and regulators start talking about requiring it to set even more aside to make sure no policyholders are left in a lurch.

By extension, $400 billion is where alarms begin going off for the entire industry.

It gets worse – or better, depending on your perspective.

In addition to state regulators’ requirements, the private rating agencies that gauge insurers’ financial strength and claims-paying ability don’t want to see reserves get anywhere near “Empty.” To get a strong rating from A.M. Best, Fitch, S&P, or Moody’s, insurers have to keep even more in reserve. 

Why do private agency ratings matter? Consumers and businesses use them to determine what insurer they’ll buy coverage from. Also, stronger ratings can contribute to lower borrowing expenses, which can help keep insurers’ operating costs – and, in turn, policyholders’ premiums – at reasonable levels. 

So, let’s say these additional reserves amount to about $200 billion for the industry. The nearly $800 billion surplus we started with now falls to about $200 billion.

To cover claims by all personal and commercial policyholders in a given year without prompting regulatory and rating agency actions that could drive up insurers’ costs and policyholders’ premiums.

Which brings us to today.

Losses ordinary and extraordinary

In the first quarter of 2020, the industry experienced its largest-ever quarterly decline in surplus, to $771.9 billion. This decline was due, in large part, to declines in stock value related to the economic recession sparked by the coronavirus pandemic.

Nevertheless, the industry remains financially strong, in large part because the bulk of insurers’ investments are in investment-grade corporate and governmental bonds. And it’s a good thing, too, because the conditions underlying that surplus decline preceded an extremely active hurricane season, atypical wildfire activity, and damages related to civil unrest approaching levels not seen since 1992 – involving losses that are not yet reflected in the surplus.

Insured losses from this year’s Hurricane Isaias are estimated in the vicinity of $5 billion. Hurricane Laura’s losses could, by some estimates, be as “small” as $4 billion or as large as $13 billion.

And the Atlantic hurricane season has not yet peaked.

The 2020 wildfire season is off to a horrific start. From January 1 to September 8, 2020, there were 41,051 wildfires, compared with 35,386 in the same period in 2019, according to the National Interagency Fire Center. About 4.7 million acres were burned in the 2020 period, compared with 4.2 million acres in 2019.

In California alone, wildfires have already burned 2.2 million acres in 2020 — more than any year on record. For context, insured losses for California’s November 2018 fires were estimated at more than $11 billion.

And the 2020 wildfire season still has a way to go.

All this is on top of routine claims for property and casualty losses.

Four billion here, 11 billion there – pretty soon we’re talking about “real money,” against available reserves that are far smaller than they at first appear.

No end in sight

Oh, yeah – and the pandemic-fueled recession isn’t expected to reverse any time soon. Economic growth worldwide remains depressed, with nearly every country experiencing declines in gross domestic product (GDP) – the total value of goods and services produced. GDP growth for the world’s 10 largest insurance markets is expected to decrease by 6.99 percent in 2020, compared to Triple-I’s previous estimate of a 4.9 percent decrease. 

If insurers were required to pay business-interruption claims they never agreed to cover – and, therefore, didn’t reserve for – the cost to the industry related to small businesses alone could be as high as $383 billion per month.

This would bankrupt the industry, leaving many policyholders uninsured and insurance itself an untenable business proposition.

Fortunately, Americans seem to be beginning to get this.  A recent poll by Future of American Insurance and Reinsurance (FAIR) found the majority of Americans believe the federal government should bear the financial responsibility for helping businesses stay afloat during the coronavirus pandemic. Only 16 percent of respondents said insurers should bear the responsibility, and only 8 percent said they believe lawsuits against insurers are the best path for businesses to secure financial relief.

Further Reading:

POLL: GOVERNMENT SHOULD PROVIDE BUSINESS INTERRUPTION SUPPORT

TRIPLE-I GLOBAL OUTLOOK: CONTINUED PRESSURE ON INVESTMENTS & PREMIUMS

BATTLING FIRES, CALIFORNIA ALSO STRUGGLES TO KEEP HOMEOWNERS INSURED

LAURA LOSS ESTIMATES: $4 BILLION TO $13 BILLION

ATYPICAL WILDFIRE ACTIVITY? OF COURSE — IT’S 2020

SWISS RE: A KATRINA-LIKE HURRICANE COULD CAUSE UP TO $200 BILLION IN DAMAGE TODAY

U.K. BUSINESS INTERRUPTION LITIGATION SEEMS UNLIKELY TO AFFECT U.S. INSURERS

RECESSION, PANDEMIC TO IMPACT P/C UNDERWRITING RESULTS, NEW REPORT SHOWS

BUSINESS INTERRUPTION VS. EVENT CANCELLATION: WHAT’S THE BIG DIFFERENCE?

CHUBB CEO SAYS BUSINESS INTERRUPTION POLICIES ARE A GOOD VALUE AND WORK AS THEY SHOULD

TRIPLE-I CHIEF ECONOMIST: P/C INDUSTRY STRONG, DESPITE SURPLUS DROP

INSURED LOSSES DUE TO CIVIL UNREST SEEN NEARING 1992 LEVELS

COVID-19 AND SHIPPING RISK

BUSINESS INTERRUPTION COVERAGE: POLICY LANGUAGE RULES

Poll: Government should provide business interruption support

Getty Images

Business interruption losses from a global pandemic are uninsurable due to their sheer scope.  Business interruption losses (in the U.S. alone) from the coronavirus are estimated at $220-$383 billion per month — an amount the industry  could not and should not be expected to  cover.

Americans across the country appear to recognize that only the federal government has the capacity to provide the relief business owners need. A recent poll initiated by Future of American Insurance and Reinsurance (FAIR) found that the majority of Americans believe the government should bear the financial responsibility for helping businesses stay afloat during the coronavirus pandemic.

The poll, conducted by CivicScience, found that only 16 percent of respondents said they believe insurance companies should bear the responsibility for helping businesses during the pandemic, and only 8 percent believe lawsuits against insurers are the best path for businesses to secure financial relief.

Business interruption insurance contracts were not priced to cover global pandemic risks, so forcing insurers to pay for claims their policies weren’t priced to cover would harm all policyholders, said FAIR in their commentary on the poll results.

A government-backed policy solution can provide immediate relief to struggling business owners and protect insurers’ ability to keep promises to policyholders for covered catastrophe losses, like damage from wildfires and hurricanes.

Trial attorneys’ attempts to retroactively force uninsurable pandemic coverage in business interruption insurance contracts are detrimental to policyholders, communities, insurers, and economic growth. A government-backed solution for struggling businesses in need of relief has never been more urgently needed, FAIR concluded.

ABOUT FAIR
FAIR is an initiative of the Insurance Information Institute and its member companies whose mission is to ensure fairness for all customers and safeguard the industry’s longstanding role as a pillar of economic growth and stability.

U.K. Business Interruption Litigation Seems Unlikely to Affect U.S. Insurers

The Financial Conduct Authority (FCA), which regulates insurers in the United Kingdom, has indicated that it doesn’t believe COVID-19-related losses trigger most business insurance policies because such policies typically require a direct connection between financial loss and physical damage to the insured property.

Think fire, flood, wind, or earthquake damage.

The FCA is now litigating a test case involving policies of eight insurers that don’t require property damage to trigger coverage (Hear a three-minute explainer from the Centers for Better Insurance).

Is this case relevant to U.S. property/casualty insurers? It depends on whom you ask.

The FCA is looking at 17 policy wordings from the eight insurers and asking whether COVID-19 triggers a payout. Based on other policies the regulator has studied, the Financial Times reports, the court’s ruling are “expected to apply to nearly 50 insurers, who sold coverage to 370,000 customers.”

Senior executives from specialist insurance and reinsurance underwriter Hiscox Group warned that the FCA’s eventual findings could drive additional COVID-19 losses to its reinsurance book, Artemis reports.

Tom Baker – an expert in insurance law and policy at the University of Pennsylvania – called the U.K. case a “one-way ratchet” for U.S. insurers.

“If the carriers lose or end up having a lot of coverage, that’s going to be bad for them here” in the United States,  Baker said. “I think if the carriers win, the insurance policies [in the U.K.] are really different. They tend to be named-peril, rather than all-risks policies. I think it will be easy to distinguish them.”

Jason Schupp, founder and managing member of Centers for Better Insurance, disagrees that an adverse ruling for U.K. insurers will have much of an effect on their U.S. counterparts.  

“In Europe, [FCA] authorization to provide miscellaneous financial loss insurance allows an insurance company to write business interruption insurance that does not require evidence of property damage” to pay a claim, Schupp says. Even though the United Kingdom is no longer part of the European Union, Schupp says, “U.K. law itself recognizes the miscellaneous financial loss class of insurance.”

What does this mean for pandemic business interruption coverage in the United States? Not much, according to Schupp.

“The outcome of the U.K. litigation is unlikely to be relevant to the dozens – or perhaps hundreds – of business interruption lawsuits making their way through U.S. courts, where the property damage question is front and center,” Schupp says.

He goes on to say that proposals coming out of Europe or the U.K. for pandemic insurance going forward – such as a Lloyd’s framework – contemplate non-property-damage business interruption insurance solutions…. These proposals do not appear compatible with the current U.S. insurance regulatory system.”

A ruling by the FCA is expected in mid-September. Last week, the regulatory body said that, while the case doesn’t address how any resulting claims payments would be calculated, “We may intervene and take further actions where firms do not appear to be meeting our expectations and treating their customers fairly.”

Business Interruption
vs. Event Cancellation: What’s the Big Difference?

As I’ve written previously, the question of whether business interruption provisions in commercial property insurance apply to COVID-19-related losses has become a major topic of debate during this pandemic. Suits have been filed seeking to establish that policyholders are entitled to coverage for such losses – even when losses associated with infectious disease are specifically excluded in the policy language.

This debate has been muddied in some circles by people confusing business interruption coverage with event cancellation insurance.

Citing the fact that the National Collegiate Athletic Association (NCAA) had its claim paid when it cancelled its annual men’s basketball tournament, as did the All England Lawn Tennis Association when it canceled its Wimbledon event, some wonder why many other businesses’ claims are being rejected.

While superficially similar, these claims couldn’t be more different from the business interruption cases currently being litigated.

Business Interruption: Physical Damage Required

Property insurance covers physical loss or damage to an insured’s property. The business interruption provisions of commercial property policies typically require a direct relationship between a physical loss or damage and the resulting lost income. The Insurance Services Office (ISO) form for commercial property coverage – the basis of many policies – specifies that any covered loss due to “necessary suspension” of operations must be caused by “direct physical loss of or damage to property at premises which are described in the Declarations.”

This is a critical point, as most business losses related to COVID-19 are due to employees and customers remaining absent, supply chain disruptions, and other factors – not to physical damage.

 “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 when, say, a fire destroys the interior of a building or wind damages windows. The virus leaves no visible imprint. Even if remediation is needed – like cleaning mold from metal surfaces – insurers cite cases in which judges have ruled there’s no physical damage from mold if the mold can be cleaned off.

Add to this the fact that most policies exclude coverage for losses related to infectious diseases and it’s hard to imagine U.S. courts finding in favor of the plaintiffs – particularly when pandemic insurance existed well before COVID-19 and was largely ignored by business owners and risk managers.

Event Cancellation Insurance

COVID-19 has led to the cancellation of events from weddings to business conferences to the Tokyo Summer Olympics. Individuals and businesses buy event cancellation insurance against losses resulting from a cancellation due to circumstances beyond their control, including:

  • Weather or other natural events like hurricanes, tornadoes, and earthquakes, and
  • Human-caused events such as labor strikes and acts of terrorism.

If a policy is an “all-cause” or otherwise unlimited policy, it could cover cancellations due to COVID-19, particularly if purchased before 2020.

Wimbledon’s organizers were among the few who bought event cancellation insurance that specifically included coverage for losses related tocommunicable disease after the 2003 SARS outbreak. They paid about £25.5 million (US$33 million) in premiums since then and are set to receive around £114 million (US$142 million) for this year’s cancelled tournament, according to GlobalData.

GlobalData said the event still faces a net loss. The total Wimbledon revenue loss is estimated at around £250 million (US$328 million).

The NCAA had a policy for its “March Madness” tournament that had to be cancelled.  Its event cancellation policy covered just $270 million, even though the tournament generates more than $800 million a year. The organization reportedly was better prepared for a cancellation several years ago, when it built up savings of nearly $500 million to help mitigate the financial impact of a lost tournament.

“Then, in 2015, new leadership decided to spend more than $400 million of those savings without increasing the NCAA’s insurance coverage by following a questionable theory about the risk of saving that much money,” the Washington Post reports, citing former NCAA employees.

The availability of such coverage without exclusions for infectious disease may be limited or even more expensive in the wake of the current pandemic.

Additional Insureds: How Policy Language Can Create Dramatic Consequences

By John Novaria, Managing Director, Amplify

Underwriters routinely receive requests to add additional insureds to policies. But failure to add insureds correctly can open up insurers to potentially huge losses.

Companies typically need to add additional insureds to allow them to fulfill their obligations with their contractual partners. The requests are commonly associated with coverage for the marine and energy business, but construction and other industries often need to add insureds as well. Those requests can involve commercial general liability, excess and umbrella and other liability policies.

Maritime legal expert Harold “Hal” K. Watson recently conducted an interactive educational webinar on the proper addition of insureds for the American Institute of Marine Underwriters (AIMU). Watson, a partner at Chaffe McCall LLP in Houston, is a former president of the Maritime Law Association of the U.S. and an internationally renowned authority in marine and energy insurance.

Using detailed examples from actual cases — including the Deepwater Horizon disaster — Watson illustrated how policy language surrounding additional insureds can cause claims to go wrong. He offered the audience of underwriters, brokers and claims adjusters practical suggestions for writing policy language in specific ways to prevent problems.

Watson explained how arguably ambiguous policy language became a significant factor in Deepwater Horizon, the offshore drilling rig that in April 2010 blew out, resulting in an explosion that killed 11 crew members and caused billions of dollars in pollution and environmental damage in the Gulf of Mexico. Transocean owned the drilling rig, but it was under contract to BP. Watson noted that the contract between the two companies required Transocean to name BP as an additional insured for some purposes. But there was uncertainty whether or not the insurance policy incorporated the limitations of the drilling contract.

The U.S. Court of Appeals for the Fifth Circuit initially held that the insurance policy did not incorporate the limitations in the contract, but then certified the case to the Texas Supreme Court since Texas law applied. The Texas Supreme Court finally ruled that the insurance policy did incorporate the limitations, but if the Fifth Circuit’s original ruling had stood, BP would have been entitled to all of Transocean’s insurance coverage limits.

Watson explained how wording can be used to avoid situations that essentially give away an insured’s coverage. He also discussed other areas involving risks and exposures including:

  • The distinction and nuances between indemnity clauses and insurance policies.
  • The need for caution when providing broad coverage for additional insureds.
  • How additional insureds come into play in umbrella and excess liability policies, including specialized maritime policies.
  • The effect of anti-indemnity statutes pertaining to oil and gas wells in Texas and Louisiana

AIMU has seen growing interest in its educational offerings as it pivots from live to virtual events. According to AIMU President John Miklus, there were nearly 100 attendees at the “Additional Insureds” webinar and a similar number at another recent webinar on yacht insurance fundamentals.

AIMU’s primary focus is on education of its members and the insurance community at large and continues to deliver its programs using innovative methods. Click here for more information on upcoming classes.

Legislatures Advance
COVID-19-related Bills

As states struggle to identify the best ways to reopen their economies, agencies, and schools from the coronavirus-related lockdown, legislatures have been moving forward legislation to protect them and the people they employ.

Virginia Approves Worker Health & Safety Standard

The Virginia Occupational Safety and Health (VOSH) – the state’s version of the federal Occupational Safety and Health Administration (OSHA) – will enforce a standard that mandates and, in some instances, exceeds guidance issued by the U.S. Centers for Disease Control and Prevention (CDC) and OSHA, PropertyCasualty360.com reports.

The standard protects employees who raise reasonable concerns about infection control to print, online, social, or other media. It covers most private employers in Virginia, as well as all state and local employees.

The standard also requires building and facility owners to report positive COVID-19 tests to employer tenants. It exempts private and public institutions of higher education with reopening plans certified by the State Council of Higher Education in Virginia (SCHEV) and public-school divisions that submit reopening plans to the Virginia Department of Education. No such exemptions are provided to private elementary and secondary schools.

In addition to CDC and OSHA guidelines, the standard requires employers to:

  • Provide flexible sick-leave policies, telework, and staggered shifts when feasible;
  • Provide handwashing stations and hand sanitizer when feasible;
  • Assess risk levels of employers and suppliers before entry;
  • Notify the Virginia Department of Health of positive COVID-19 tests;
  • Notify VOSH of three or more positive COVID-19 tests within a two-week period;
  • Assess hazard levels of all job tasks;
  • Provide COVID-19 training of all employees within 30 days (except for low-hazard places of employment);
  • Prepare infectious disease preparedness and response plans within 60 days;
  • Post or present agency-prepared COVID-19 information to all employees; and
  • Maintain air handling systems in accordance with manufacturers’ instructions and the American National Standards Institute (ANSI) and American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) standards.

Special Legislative Session for Tennessee Liability Bill

Weeks after Tennessee’s two legislative chambers failed to come to an agreement on legislation surrounding civil liability for coronavirus, Gov. Bill Lee called the state’s General Assembly to return next week for a special session, The Tennessean reports.

Lee issued an order asking members of the legislature to return to Nashville at 4 p.m. on Aug. 10 to take up the matter, which would extend broad immunity to businesses, schools, and other entities against COVID-19-related lawsuits.

The General Assembly also is expected to take up two other bills it failed to pass before adjourning in June. One would expand medical professionals’ ability to offer telehealth services and encourage insurers to cover those costs. The other would increase penalties for protesters camping and engaging in vandalism at the Capitol. A group of protesters has remained across the street from the Capitol for more than 50 days, resulting in the arrest of some for trespassing and writing messages in chalk.

Nevada Senators Advance Liability Shield Measure

State senators in Nevada, by an overwhelming majority, advanced legislation that would extend COVID-19 liability protections to businesses, nonprofits, schools, and governmental agencies and outlining several measures intended to protect hospitality workers, The Las Vegas Sun reports.

The legislation would extend COVID-19 liability protections to many entities that have “substantially complied with controlling health standards.” Provisions of the bill would sunset either upon the termination of the current state of emergency or in July 2023.

The measure wouldn’t extend to most private health care providers.

“Unease with the bill’s focus on the tourism and gaming industry crossed party lines,” the Sun writes. “Sen. Marcia Washington, D-North Las Vegas, said she was concerned why the bill singled out hospitality workers: ‘I’m here to represent, as far as I’m concerned, everybody, all the workers in the state of Nevada,’ Washington said.”

Marie Neisess, president of the Clark County Education Association, said the bill did nothing to help teachers going back into the classroom this year.

“Even with the best safety measures in place, educators and students will still be at risk,” Neisses said. Putting a bill in place that protects the employer rather than the employee is unacceptable.”

The bill now advances to the Senate floor for final action as lawmakers continue to meet in special session.

“Rebuttable Presumption” for Essential Workers Goes to N.J. Governor

New Jersey may become the next state to enact a law presuming that essential workers who acquire COVID-19 did so on the job, Business Insurance reports.

Lawmakers in the New Jersey Assembly and Senate on Thursday passed S.B. 2380 with a 42-27 vote in the Assembly and a 27-12 vote in the Senate. The bill, introduced in early May, would create a rebuttable presumption for essential workers seeking workers compensation for acquiring COVID-19 on the job during a declared state of emergency.

The bill identifies essential employees as those whose duties are considered essential during an emergency response and recovery operation; public or private sector employees whose duties are essential to the public’s health, safety, and welfare; emergency responders and workers at health-care facilities and those performing jobs that support a health-care facility, such as laundry, research, and hospital food service.

The bill moves to Gov. Phil Murphy’s desk. If signed into law, the legislation would take effect immediately and be retroactive to March 9. According to Business Insurance, a spokeswoman for Gov. Murphy declined to comment on whether he intended to sign the legislation.

Chubb CEO says business interruption policies are a good value and work as they should

Evan Greenberg

In a July 29 earnings call Evan Greenberg, the CEO of Chubb, addressed the lawsuits filed by many businesses over business income (interruption) coverage during the COVID-19 pandemic. He stressed that even though business interruption (BI) policies do not cover a pandemic, they are a good value and work as intended.

“Standard BI policies, which are an addendum to a fire policy, require direct physical loss or damage to the property, for example, a fire or flood damages the property and prevents the business from operating while repairs are being made.  COVID-19 does not cause physical loss or damage to a property, despite the trial bar’s efforts to influence some government officials in the wording of their civil public shutdown orders,” he said.

Greenberg reiterated the uninsurable nature of pandemics and the necessity for the federal government to take the lead in mitigating pandemic risks. To properly service all policyholders, Greenberg said, the insurance industry must not be distracted by attacks from the legal community.

The comments appear in their entirety below.  

Remarks from Evan Greenberg, Chubb Second Quarter Earnings Call, July 29, 2020

I am going to say a few words about the business interruption issue that I know is on the minds of many.  As you know, the insurance industry is under attack by the trial bar over business interruption claims.  They represent many businesses which purchased BI coverage that does not provide cover for pandemic, and these customers are understandably disappointed and upset.  Plaintiff attorneys are attempting to torture or reverse engineer insurance contract language to conjure up business interruption coverage that for the most part simply doesn’t exist. 

Coverage for a pandemic was never contemplated in standard business interruption policies, and therefore no premiums were ever charged for that risk.  In fact, state insurance regulators, who approve the policies, have been clear that this risk is not covered and that the industry could not cover the massive open-ended tail risk of a global pandemic because it threatens the industry’s solvency.  Without the federal government playing a major role to cover the tail risk, pandemics are simply uninsurable on a broad basis.

Standard BI policies, which are an addendum to a fire policy, require direct physical loss or damage to the property, for example, a fire or flood damages the property and prevents the business from operating while repairs are being made.  COVID-19 does not cause physical loss or damage to a property, despite the trial bar’s efforts to influence some government officials in the wording of their civil public shutdown orders. 

Though it doesn’t cover pandemic, standard BI coverage provides good value for the money.  We estimate the industry pays out about 70 cents in insurance claims for every business interruption protection dollar collected, with most of the remaining amount paid in commissions, premium taxes and other expenses.   For Chubb, in addition to our normal losses this year, we will pay BI claims for policies that specifically covered certain pandemic-related shutdowns such as those for the entertainment industry.

We care deeply about properly supporting and servicing all of our policyholders, and I have particular sympathy for the millions of businesses that have suffered terribly during the pandemic-forced economic shutdowns.  But it would be wrong – in fact, catastrophic and irresponsible – to pay the claims of those who didn’t have coverage, and in fact didn’t pay premiums for the coverage, by using funds that have been properly reserved for the legitimate claims of the vast majority of our P&C policyholders who number over 100 million globally. 

To provide some context, in 2019, Chubb paid $24 billion on approximately four million property and casualty claims.  Again, to pay billions of dollars in uncovered claims by raiding the reserves or capital needed to pay claims on other kinds of policies, such as auto and home, commercial insurance exposures, or respond to natural catastrophes such as hurricanes and wildfires, would be irresponsible to the vast majority of our policyholders and to our shareholders.

Beyond the business interruption challenges of the current COVID-19 crisis, the insurance industry has an important role to play in society and in the economy, and that includes fully participating in the development of a prospective future pandemic business interruption solution should crises arise.  Earlier this month, Chubb released its Pandemic Business Interruption Program designed to mitigate the economic disruption and losses in the event of a future pandemic.

Our framework is not the first plan to be introduced. But the public-private partnership framework we developed has important differences from the other leading proposals. By sharing our ideas and approach, we hope to spark and influence a productive debate on a solution that will work for businesses of all sizes, taxpayers, our industry and the economy more broadly.

First and foremost, I believe the industry can and should take pandemic risk along with the government.  This is a peril that can be covered to a greater degree than we do today as long as the tail exposure is covered by the government.  It’s our job to figure out how to do that.  We can do more than simply play an administrative role or we belittle ourselves and we’re less relevant than we can or should be. 

The framework we announced has attributes that we believe will make for a successful program.  It accounts for the different needs of small, medium and, to a modest degree, large businesses. Premiums for small business will be affordable and they will be paid quickly. Larger companies would pay a fair and risk-adjusted price to both the government and insurers for pandemic cover in a program built on free-market principles.  The government gets paid for the use of its balance sheet – it’s not a handout to larger companies.

Our framework has incentives for broad participation by the industry. And by committing insurance industry capital and providing opportunity for increased risk-sharing over time as direct and secondary markets develop, the pandemic burden shouldered by the government will ultimately be lessened to a degree.

This is an important issue for our nation.  We look forward to contributing to the dialogue as policymakers work to refine the most effective solution.