How to handle three made-in-COVID client situations

The COVID-19 pandemic has created a series of unique risk exposures for Canadian policyholders, and industry experts gave a crash course on how they would handle these newly common scenarios.

Three made-in-COVID situations presented themselves to clients over the past year, as presented in New Risk Exposure in a COVID World. The Insurance Institute and Insurance Brokers Association of Ontario hosted the webinar, which was moderated by Greg Smith, chief client officer at Crawford & Company (Canada) Inc.

Three panelists, including a broker, a commercial underwriter, and an insurance lawyer, gave their take on how to handle these new, COVID-related scenarios. Brooke Hunter, president and CEO at Hunters International Insurance Brokers was one of three panellists on the webinar. Also appearing were Obaid Rahman, vice president of commercial underwriting and specialty lines at Economical Insurance; and Edona Vila, a partner at law firm Borden Ladner Gervais LLP.

The panellists were asked to comment on three different scenarios:

• A laid-off parent who sets up a learning pod with other neighbourhood children
• A student who starts his own personal training business. The business is outdoors during the summer, and then moves inside during the winter
• A small business owner who starts selling items online and hires a family member to deliver the products

In the first scenario, the parent, Myra, creates a learning pod to teach five children among three families. They come into her home one day a week. She designs activities recommended by the school board. The parents split the costs of supplies and no money is otherwise exchanged.

Clockwise from top left, Brooke Hunter from Hunters International Insurance Brokers, Obaid Rahman, from Economical Insurance, moderator Greg Smith of Crawford & Company (Canada) and Edona Vila, from Borden Ladner Gervais LLP, take part in the webinar, “New Risk Exposure in a COVID World,” presented by the Insurance Institute and IBAO.

For Hunter, the broker, Myra would be smart to contact her for advice. “I would look at this like almost a babysitting arrangement,” Hunter said. She observed that Myra should be aware of any exclusions under her tenant’s policy, specifically exclusions for communicable disease and for liability claims arising out of abuse or sexual misconduct.

“I know it’s uncomfortable talking about these difficult issues, and I can’t reassure you by saying that you can get your policy changed to cover it,” Hunter said she would tell Myra. “But I do think that you need to understand that you’re taking a risk.”

Hunter recommended formalizing the arrangement with the other parents so everyone agrees to the risks.

Rahman agreed. Of further interest to him was the fact that there are five children in the home. In Ontario, that’s the maximum before it would be considered unlicensed childcare. “From an underwriting perspective, it just means that there’ll be an extension added for that,” Rahman said.

While there may be additional premium, the policy would still be a personal one, he noted.

In Scenario 2, a student named Yuri launched his personal training business. He has a dozen clients and makes $2,500 per month. In winter, his sessions are held in-person in his rented basement. He has an air purifier for safety. After a client was injured (though they chose not to sue or pursue any claims), he has all participants sign a waiver.

In this case, waivers are tricky, said Villa, a lawyer. “Even [for] the best-worded waivers, the takeaway is that they are, in the best of times, about 50% enforceable,” she said.

And if he has tenant insurance, there’s a business exclusion clause that would likely apply, Villa said.

Another consideration is that if Yuri is under 21, he may be covered under his parents’ homeowners insurance if there’s a claim. If that’s the case, “this isn’t just a conversation between Yuri and I — it might be a conversation between Yuri, myself, and his parents,” Hunter said.

“Now, really what we should be telling Yuri is, ‘Go out and get some business insurance, for goodness sake. We can do that for you,’” she added.

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The fact he had an air purifier but there was no mention about following safety guidelines, and that he had waivers signed only after an incident, raises red flags for Rahman. “All of those things would, from a risk perspective, make me a lot more skeptical about the quality of this risk,” he said. “From an underwriting perspective, I think I would struggle to provide him with any sort of coverage [that] would be…affordable within the revenue he’s making.”

In Scenario 3, Cynthia is the owner of a clothing store. Lockdown and business restrictions have pushed her to sell more online. She has hired her brother-in-law, Juan, to do deliveries.

Cynthia’s going online immediately caught Rahman’s attention. Her cyber risk exposure has probably increased, he said, adding that he’d want to take a look at how she’s handling personal and financial information. If she’s using a payment service, that’s less of a concern. If she’s managing that all herself, “then it becomes a little more complicated and I would be looking at her tech security systems, her protocols for managing this information, what’s the governance around that, how her employees react to that.”

As for Juan, that’s more straightforward with an upgrade to a commercial auto policy, he added.

Hunter agreed that cyber concerns should be at the top of the list for Cynthia. However, for a business of her size, she may not be able to afford full coverage. “But at the very least, we need to be talking about adding cyber coverage onto her package policy so that she’s got a professional resource to call in the event that somehow data did escape.”

Furthermore, this type of situation emphasizes the need for brokers to get the message out there that when clients go through a big change, they need to contact their broker.

“There is Step Number 1 in all three of these cases, as these people are trying to get on with their lives and make things work,” Hunter said. “A quick call to your insurance broker just to talk through a few things. And no, not everything is insurable. But at least you’re better armed if you know.”

Feature image by iStock.com/sesame