Virus Chaos Business Interruption Claims May Destroy the Property and Casualty Insurers


In any case this emergency health chaos will trigger the largest single loss in insurance history.

UBS estimates industry insured losses for non-US business interruption total $7 to 22-B.

In the US, monthly small business losses are seen at between so far at $431, according to the American Property Casualty Insurance Association, rendering virtually moot the $6-M a month in premiums the industry receives for Key property insurance lines. It is unclear how much of their losses are insured for this chaotic health event.

President Trump weighed in on the issue during a 10 April briefing, saying he had spoken to some restaurateurs who had been paying for business interruption cover for 35 years.

They have been paying a lot of money for a lot of years…And then when they finally need it, the insurance company says, ‘we are not going to give it‘,” President Trump said. “We cannot let that happen.”

A group of famed US restaurateurs, including Wolfgang Puck and Thomas Keller, owner of the French Laundry in California’s Napa Valley, last month banded together with Louisiana lawyer John W. Houghtaling to form the “Business Interruption Group,” or BIG, a non-profit organization launched to push for payouts.

If insurers do not start paying…we will bring BIG legal action in every state,” the group said.

In Britain, celebrity chef Raymond Blanc, who runs 36 restaurants through his Brasserie Barco group, has hired law firm Legal Risk.

We think our policy is bullet-proof,” Brasserie Barco Chairman Mark Derry said.

Analysts say it is hard to strip out business interruption from other commercial property policies, analysts estimate the specific coverage earns $40-B in annual premiums globally.

A Key issue is whether a virus can be described as causing physical damage, often a prerequisite to trigger payments.

Epidemics are generally excluded although businesses can buy additional coverage. But that extra policy might specify the diseases it covers – meaning the new coronavirus that only appeared in recent months would not be included.

Some businesses buy extra coverage for a government-mandated shutdown, but again, this may not apply to a pandemic.

Whether businesses will be covered depends on the wording of individual policies, said the vice president of the London Forum of Insurance Lawyers.

Travelers Companies Inc (NYSE:TRV) has pushed back against a lawsuit filed in Los Angeles by criminal defense lawyer Mark Geragos, who said his business had been hurt by shutdown orders.

Insurers do not collect premiums to cover losses that policies weren’t written to cover,” said Travelers CEO Alan Schnitzer on Tuesday in an earnings call. Travelers’ standard coverage excludes viruses.

Chubb (NYSE:CB) and Lloyd’s of London are among other insurers facing US class action suits.

The insurers declined to comment.

However, some businesses have found they are covered, the British Columbia Dental Association’s members can claim under Aviva’s (L:AV) pandemic policy, it said this week.

Insurers’ protests may be futile, as 8 states have introduced legislation which would require insurers to pay claims, mainly to small businesses, despite exclusions. Many of the bills would let insurers seek reimbursement from the states.

Insurers say such laws make retroactive changes to contracts, with global trade body the Institute of International Finance saying earlier this month in a letter to regulators that this could lead to “decreased availability of insurance, the withdrawal of insurers from certain markets and overall increases in the price of available coverage.

In France, President Macron said last week that insurers “must be there” to help stabilize the economy.

French insurers said they would put $3.47 on the table including a $1.5-B investment program and donations to the government’s aid fund.

Have a healthy weekend, Keep the Faith!