The arrival of Covid-19 vaccines has enabled Californians and others throughout much of the US to begin to breathe a sigh of relief. In the US alone, more than 311 million doses of vaccine have been given and more than 145 million people are now fully vaccinated. California leads the country in doses given (more than 40 million) and persons fully vaccinated (18.5+ million). It has been a long, long last 15+ months. But the end is happily and hopefully in sight.
A Glance Back
Meanwhile, the government-mandated shutdowns have hit many different businesses especially hard. As measured by revenue impacts, some of the most hard-hit industries include Manufacturing, Travel & Transportation, and Retail. According to a report by Robert Fairlie from UCSC, the number of working small business owners in the US dropped from 15 million to 11.7 million in a mere two months (from February 2020 to April 2020). These impacts along with so many others, from unemployment to supply chain issues to inflation and on and on, will undoubtedly impact the economy in significant ways moving forward.
During the shutdown, many business owners submitted claims for government assistance through PPP loans and other emergency grants. In addition, as we previously reported in a prior blog, many business owners of all sizes began submitting claims for their covid-related losses to their insurer, especially their property insurers. Those insurance companies in turn frequently denied the claims automatically and without conducting any investigation. This led to many insureds filing lawsuits against their insurers for the wrongful denial of policy benefits.
However, these lawsuits have frequently been struck down—oftentimes at the earliest of stages—by courts throughout the country and in both state and federal courts. According to a preliminary analysis by the University of Pennsylvania Law School (an analysis covered in a previous post to our blog), more than four times as many of those suits have been dismissed than have been allowed to proceed.
Coverage Success Stories
There have been important exceptions. For example, while claims under more standardized property policies have struggled to gain traction, claims under policies that were modified to specifically include virus coverage have met with greater success. Further, claims under pollution policies and contractors pollution policies have also sometimes found a bit more success, at least in early stages and especially where the definition of “pollutant” was broad enough to encompass viruses (or at least arguably so).
Many property insurers were offering (before the epidemic) coverage extensions for virus-related losses. There are even ISO forms for this purpose. However, according to OECD’s Policy Responses to Coronavirus, only a small fraction of insureds took advantage of these coverage extensions. Ultimately, the OECD found that less than 2% of US insureds’ claims for coverage for covid-related losses were accepted by insurers.
Individual States Join Fight
Some states are working to try to impose a different result. California, for example, has a few bills being circulated that would establish, for instance, during a state of emergency (like there was during the covid shut down) a rebuttable presumption that resulting losses are caused by physical damage and are the direct cause of business interruption.
These bills are in early stages, and it remains to be seen if they make any progress through the California legislative process. Bills in Louisiana and the District of Columbia of similar nature or purpose were reportedly abandoned.
The insurance industry, as it so often does in the aftermath of catastrophic natural events, trumpets the potential dire economic consequences if coverage were extended to include covid-related losses. Recently, Lloyd’s of London predicted the industry’s total underwriting losses will exceed $100 billion.
That said, there can be little argument with the fact that business losses tied to government-mandated shutdowns were very large—some have estimated at more than $300 billion per month just in the US.
Currently, and in no small doubt because of the lack of success policyholders have had in such litigation, the number of lawsuits for business interruption coverage is tailing off dramatically. According to Stephen Carter, author of “Businesses are Losing Their Covid-19 Lawsuits,” the number of filings has dropped to only 1/5 of where they were last summer.
While there are still ways for insureds to obtain coverage for such losses, much depends on the type of policy purchased, the scope of coverage afforded by that policy, and the actual language of the policy.
As things return to normal, it may be time for businesses of all types and sizes to reconsider their current insurance program, taking a closer look at what additional coverages might provide valuable (even company-saving) protection in the future. If you have questions about coverage for your business’s losses, whether tied to the COVID-19 pandemic or not, please reach out to our team today.