April 1, 2020 by Greg Meckbach
Your commercial clients could start asking for business interruption insurance that includes pandemic, if they have not already, a human resources lawyer says.
“I think after this pandemic, most companies would probably be well-advised to take a look at their [insurance] contracts with their legal advisor to determine whether something like a pandemic, like this, would be covered for business continuity insurance or anything along those lines,” said James Fu, a labour lawyer with Borden Ladner Gervais. “That is probably something that will be on the radar or should be on the radar of businesses going forward.”
Fu was asked by Canadian Underwriter whether clients will decide they should start shopping for business interruption coverage that includes pandemic.
“I think, especially after this pandemic, people are going to turn their minds to it and they are probably going to be asking their [insurance] providers. Some providers may say no. Some providers may say yes, but I think a part of that will be considering the cost of such a product,” Fu said in an interview on lessons learned about business continuity from the COVID-19 pandemic.
Economic loss from a pandemic is not the intent behind business interruption coverage. Instead, the idea is that if a pipe bursts or a building catches fire, and the resulting damage is bad enough to close the business, the client would get covered for the income lost.
In standard commercial lines, there is no business interruption coverage for a pandemic because you need an insured peril to trigger coverage, said Charles Brindamour, CEO of Intact Financial Corp., during a fireside chat with a TD Securities analyst.
“The business we are in is getting businesses back on track after a physical damage. Think fire, flood, theft, natural disasters. We are not in the business of pandemics,” Brindamour said during the TD Securities virtual fireside chat, released Tuesday.
Brindamour was commenting specifically on the impact of COVID-19 on Intact’s standard lines commercial coverages.
“Usually whenever there is a business need for something, products can sometimes come on line,” Borden Ladner Gervais’ Fu told Canadian Underwriter Monday. “If there is a market need, I would not be surprised if companies would be looking at that, and if they[business clients] are asking their [insurance] providers, the providers will think about it.
“The practical reality is, like all insurance products, there will be an assessment of the risk and the pricing. And if a product like that comes online, then I think there will be a certain price to it and businesses will have to consider whether or not that is appropriate for them. It is demand and supply.”