COVID-19 brought a tremendous disruption of normal daily life/business affecting personal life and businesses alike. People and companies/ institutions alike are in continuous assessment of solutions and compromises to mitigate the impact of the COVID – 19 pandemic. In the context of a continuously evolving environment, we all need to adapt and try to keep control on negative impact.
The human suffering and financial crisis created and further expected due to COVID-19 are hard to manage and any potential mitigation should be sought for and implemented. In this context, one should consider the possibility to (i) use the existing insurance policies and analyze whether an insured risk has occurred (respectively indemnification may be claimed), (ii) take out insurance.
Reasonably and theoretically, damages/losses triggered by COVID-19 outbreak/ actions and / or measures imposed in view of limitation of infection proliferation could be claimed under existing insurance policies (life insurance / accident and health insurance/ all risks insurance / business interruption insurance, workers’ insurances etc.). As potential damages/ losses to be recovered we would list: (i) income loss and business interruption resulting from the measures imposed through various enactments (military ordinances) such as suspension of the activity of the companies undertaking their activity in malls, restaurants, bars, dental practices, betting shops, etc.; (ii) business interruption loss as a result of government-imposed quarantines of individuals, as well as severe restrictions on conduct of certain activities (artistic activities (e.g. concerts, theatre plays, rolling films); group sport related activities, etc.); (iii) costs with evacuation of the personnel, sanitization of the space, closing of office buildings; (iv) travel related expenses in case of a travel cancellation due to travel restrictions being imposed worldwide, (v) potential hospitalization/ medical treatment costs, (vi) workers’ compensation claims.
Assessing whether coverage is actually applicable, is always a matter of specific terms and conditions of the insurance policy (namely special and general conditions/ exclusions), as well as, of circumstances that lead to the alleged insured events, as not all current events, especially in the case of business interruption, are directly linked to the pandemic situation or may qualify as a force majeure event and thus be excluded from coverage.
For example, insurers learnt their lesson during the 2003 SARS and introduced exclusion clauses for communicable diseases and epidemics/pandemics, thus being rather common practice for insurers to exclude from coverage pandemic events, outbreaks or generally force majeure events. We have seen these categories of excluded events applicable in a multitude of insurance policies ranging from travel, to health insurance and business interruption policies. Nevertheless, even if a general exclusion is included in the insurance policy a careful assessment should be made on the details of excluded events by reference to the context of the occurred event.
Another matter that is recommendable to be given the necessary attention is the procedure to be followed in case of occurrence of an insured event. Forms and timing is strongly recommendable to be observed as failure to observe them can lead, in some instances, to the insurer refusing to pay the indemnity. Also, always keep record of communications with the insurer, as well as other contractual parties, as it might become relevant in future discussions or even claims.
While the above focuses on the scenario when policies are already in place, the hot questions are: what happens next? are insurers closing their doors during the COVID-19 pandemic for new policies or expansion of the risks under existing policies?
It is commonly acknowledged that insurance companies don’t like the unknown, they operate on numbers and the current events have no actuarial tables to help them decide the rates for each applicant. Our Civil Code does not prohibit an insurance company from covering the losses/damages associated with the COVID-19 outbreak.
From a purely commercial and business perspective, assuming that events formerly part of exclusions shall benefit of coverage for a long term* seems to be a no go for insurers – on medium term, such approach shall lead to insurance services becoming rather expensive as in the end the insurers must ensure their solvency ratio.
*Some insurance companies have recently announced that they are willing to expand the coverage of their travel insurances/ health insurance/ life insurance so as to cover COVID-19 related risks as well which is a much welcomed action.
A different subject is the insurance for business interruption as it is not a question of whether the pandemic situation will lead to an economic crisis, the potential unknown is the impact and duration and in this context in entering into future policies specific attention should be granted to wording of exclusions, which are in many cases “standard” and not sufficiently clear.
It remains to be seen if the insurance industry shall keep its key role in supporting customers and societies through the crisis and the recovery and their openness to negotiate wording of specific excluded events.