How the largest commercial brokerage views its COVID E&O exposure

Although some commercial clients may start “suing everybody” because their business interruption insurance did not cover income lost during the pandemic, brokers could not have obtained broad-scale pandemic coverage for all clients even if they wanted to because the exposure to insurers is in the trillions, the head of Marsh & McLennan Companies Inc.  suggests.

“Obviously coverage disputes are occurring [involving] clients who may believe that they have coverage within some of their policies related to COVID, and some of those clients may end up suing everybody, but that really hasn’t occurred yet,” Marsh & McLennan CEO Dan Glaser said on a recent conference call discussing his company’s financial results for the second quarter of 2020.

During the call, an investment banking analyst asked about Marsh’s errors and omissions coverage, its exposure and its retention. New York City-based Marsh is the world’s largest commercial brokerage.

Marsh & McLennan does not release details about its E&O exposure to the general public but Glaser said July 30 he is “not overly concerned” about Marsh & McLennan’s exposure to E&O claims from clients suffering COVID-related losses.

“I think we have good systems and controls,” he replied. “And frankly, just like it would be impossible today [to offer broad pandemic cover] – and why public-private partnerships are being talked about [to insure pandemics in the future] – broad-scale pandemic insurance is not [available],” said Glaser. “Our role as a broker is to advocate forcefully for policyholders. We do that by obtaining broad coverages and, in the event that they have a claim, we do our best to assist them in recoveries.”

Marsh & McLennan (which also owns reinsurance brokerage Guy Carpenter and consulting firms Mercer and Oliver Wyman) topped a recent A.M. Best Company Inc. ranking of commercial P&C brokerages by revenue. Aon and Willis Towers Watson (whose shareholders are scheduled to vote Aug. 26 on whether they will merge) ranked second and third respectively. Marsh & McLennan acquired Jardine Lloyd Thompson in 2018.

During the July 30 Marsh & McLennan conference call, Glaser alluded to several lawsuits filed in courts around the world that allege insurers are in breach of contract in denying business interruption coverage due to the pandemic. Two such lawsuits were recently dismissed, one in Michigan and the other in New York.

Several class actions have also been filed in Canada. Plaintiffs include restaurants, retailers, hotels, optometry outlets and other clients whose operations were curtailed this past March after several provinces brought in emergency measures to reduce the risk of transmitting COVID-19, a viral disease that the World Health Organization declared a pandemic this past March.

Last month for example, law firms Koskie Minsky LLP and Merchant Law Group filed a lawsuit in Ontario on behalf of several representative plaintiffs against more than a dozen insurers writing business in Canada. Since then, TD Insurance told Canadian Underwriter it has been struck as a defendant because TD does not actually write business interruption. Allegations against the remaining insurers have not been proven in court.

Feature image via iStock.com/isayildiz