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Insurers adding pandemic exclusions in commercial policies that go beyond just BI


September 2, 2020   by Greg Meckbach


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Many insurers that did not start adding pandemic exclusions this past July may have to do so in January, a Winnipeg-based executive with commercial brokerage Gallagher reports.

“The majority of insurers – or all insurers – are adding specific wording around pandemic exclusions,” said Kevin Neiles, chief marketing officer and president of Western Canada for Gallagher, in a recent interview. “The intent is to take away any ambiguity there may have been with previous wordings. The intent is to make sure [pandemic] is excluded in all lines, including loss of business income. This is primarily reinsurance-driven.”

Carriers who renewed July 1 introduced new pandemic exclusions, reported Neiles.

“The remaining ones are putting it in right now, knowing that they are going to have to, as of Jan. 1, 2021. That is the big impact from the pandemic, and it seems to be pretty much right across the board with regard to property and casualty insurers.”

Neiles was asked whether brokers are noticing terms and conditions are tightening and becoming less favourable.

Provincial governments imposed a variety of emergency measures this past March to reduce the risk of people congregating and potentially spreading COVID-19. Among those measures, Ontario issued an order mandating closures of workplaces deemed non-essential by the government.

The provinces are in various stages of re-opening; as a result, many businesses that lost income are looking for insurance coverage. But many insurers say their BI policies do not cover the circumstances of those income losses arising from the lockdown. So several coverage dispute lawsuits are currently before the courts. In many of those cases, BI policies do not specifically cover or exclude pandemic.

“When it comes to the COVID-19 pandemic, insurance policies were never intended to cover losses arising from a global pandemic like this,” said Neiles. “There were and are policies in which wordings are potentially ambiguous around that. It might be on a program wording, or in a wording an insurer has agreed to for one particular client of a broker, especially for loss of business income. It varies, potentially, from program to program.” Neiles was commenting in general on commercial exclusions and not on any coverage dispute before the courts.

Insurance lawyer Ari Krajden, partner with Kawaguchi Krajden LLP, told Canadian Underwriter earlier that commercial insurers wanting to avoid pandemic exposure could add a section titled “pandemic/viral/bacterial infection” to the list of exclusions.

“It would spell out scenarios in which each of those exclusions would apply,” said Krajden.

Feature image via iStock.com/sam thomas