More than 1,500 business interruption coverage lawsuits have been filed in the United States since the onset of the pandemic, and the rulings have been all over the map due to ambiguity around whether the presence of COVID-19 in a building constitutes direct loss or physical damage to the property. While the insurance industry has taken a united stance that pandemics are “fundamentally uninsurable,” Partners Anamay Carmel and Mikaela Whitman explain that the insurance industry has known from court decisions over the last 60 years that they could be called on to pay for losses and claims associated with viruses.
In a feature story by Insurance Business Magazine, Carmel and Whitman discussed how the insurance industry drafted a virus exclusion in 2006 after lessons from other viruses like the Spanish Flu, SARS and MERS. Carmel said, “And so, if insurers: A) knew a pandemic was a risk; B) knew there was language available to limit their liability on that risk; and C) were telling their investors, shareholders, and the public that a pandemic could happen again, it seems rather convenient to now issue a blanket statement saying that policies will not respond to COVID-19.”
Carmel and Whitman commented that the overarching argument revolves around whether a virus can cause direct physical loss or damage to a property. Pasich LLP cites a litany of case law in complaints that refers to a range of substances, such as smoke, ammonia and other microscopic physical substances that have been held to cause physical loss or damage to property, even if there was no structural change. This is the crux of the issue that’s being decided in these business interruption claims.
There has also been discussion on whether insurers are admitting fault retrospectively if they start to introduce virus exclusions, or clear up any silent policy language around communicable diseases. “When insurers start putting virus exclusions into their policies, which we’re already seeing happen in some renewals, it points to them admitting that the previous policies should cover COVID-19,” said Whitman.
Read the full Insurance Business feature here.