March 25, 2020 by Greg Meckbach
Hub International is encouraging corporate clients to report business interruption losses arising from COVID-19 even if they think those claims will likely be denied.
“This way, the insurance companies can provide the official response,” said Mike Moyer, Toronto-based senior vice president, complex claims leader, national claims, Canada, at Chicago-based Hub International. “A second reason is, it may offer some assistance if they are trying to recover from some government relief program.”
Several Canadian provinces have announced a state of emergency since COVID-19 was declared a pandemic earlier this month by the World Health Organization. Moreover, many companies have been cancelling events and closing offices as a precaution. The Ontario government has mandated a shutdown of all work sites unless they are on an extensive list the government says is essential.
“Most business are shutting down either voluntarily as a precautionary measure, or the government is recommending a shutdown to isolate and control this virus, but there is no physical damage to the business whatsoever,” Moyer said in a recent interview with Canadian Underwriter.
Generally, business interruption insurance is usually triggered only as a result of a peril covered under a property policy. So brokers at Hub expect to see insurance carriers take the position that COVID-19 does not trigger BI coverage, Moyer reported.
“Most of the time, when the government does decide to offer support to local businesses with financial resources, oftentimes [that’s] available only where there is no other means of recovery. Insurance is another recovery avenue,” Moyer warned.
If the government were to offer support to businesses who lost income, Hub predicts the authorities would require evidence that the insurance policy doesn’t respond, before letting the business access those government funds.
“Having a denial of coverage from your insurance carrier will satisfy that requirement,” said Moyer. “So that’s another reason we think it’s in the client’s interest to report claims.”
Closure due to pandemic is not what insurers intend to cover when they underwrite business interruption.
“The vast majority of commercial policyholders who are shut down may or may not be aware, or may not understand, the nuances of coverage,” said Moyer. “So as a broker, we are getting hundreds if not thousands of calls from our clients across Canada and the United States, from people who are asking that very question: ‘Do we have a claim?’
“Our response to that is, ‘Generally speaking, this is a largely uninsurable event. However, as brokers, we do not have the authority to deny claims. We think it is in our clients’ best interests – if they aren’t sure, and they have had an impact on their business – to report it and let the insurance company come back with a formal decision on coverage.”