Covid-19 Coverage Crisis
What started as a temporary crisis has become a new normal. Businesses that initially expected to be able to reopen within a couple of months are now adapting with improvised models or have been forced to permanently close. The government has tried to assist with payroll protection and other incentives while at the same time is limiting operations making it extremely difficult to stay in business. Restaurants, gyms, entertainment are a few examples of industries that have been hit particularly hard by COVID-19 shut-downs.
Many businesses have filed insurance claims for loss of business income due to the virus or due to forced government shutdown. However, in almost every case, insurance carriers have denied claims due to language in most policies that exclude viruses See past entry on this subject: Corona Virus and Loss of Business Income Lawsuits have started to come in from businesses against insurance carriers and rulings have been in favor of the carriers primary due to the virus exclusion. Insurance carriers are slow to change and it will likely be ears before we see policy language change to include pandemic exposures if at all. After COVID-19 carriers will likely stick to their policy language and virus exclusions. Since insurance is a competitive space we will likely see some companies offer coverage for pandemics, but at what cost? Can it be offered affordably? Considering that business income insurance is relatively affordable, can insurance companies make a profit with insureds claiming months of lost revenue? Chances are likely that we will see limited loss of business income due to virus/pandemic. It is very possible that carriers will offer one month to three months of coverage, but not the standard twelve months of coverage like we see for standard losses like fire.
COVID-19 and the lack of pandemic insurance will continue to be a crisis for the unforeseeable future. Businesses that are able to adapt in light of no coverage will be the survivors and in a great position when the economy fully reopens and recovers. It is our hope that insurance carriers will also adapt and be able to offer modified pandemic coverage for loss of business income.