As an Insurer – what is your position on COVID-19 claims

 
As damages mount from business closures as a result of COVID-19 in Canada, there is a growing desire to look to insurers for some form of coverage.  With flattening of the pandemic curve in Canada, there is slow movement to reopen business in Canada.  With many small businesses already closed and only now tentatively reopening, there are significant business income losses across the country.  There is a growing expectation that insurance may be available to cover some of these losses.  Where does your insurance company stand?  Are you prepared to communicate your position to your clients?

COVID19 Claims denied result in Class Action Lawsuits in Canada
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A national class action lawsuit has been proposed, which targets Canadian insurance companies for allegedly breaching their contracts with business owners by denying business interruption claims related to the COVID-19 pandemic.
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Law firm Koskie Minsky LLP said that it has commenced the class action, together with the Merchant Law Group. The plaintiffs have also alleged that the insurance industry “conspired to deny coverage before claims are even made,” and that insurers are negligent and have breached the duty of good faith. Business interruption insurance is designed for circumstances such as the current pandemic and insurers appear to be failing small business when needed most, according to a Koskie Minsky spokesperson.

Aviva Canada face lawsuits by hotel owners

Aviva Canada is facing yet another lawsuit over denied business interruption claims, this time filed by hotels looking to claim on losses sustained due to the COVID-19 pandemic.
In a statement by Lerners LLP, it is alleged Aviva Canada was in breach of contract when the insurer denied the hotels’ loss of business income coverage. The hotels had filed for claims after suffering losses following the declaration of states of emergency and closure orders by both the federal and provincial governments.

Lerners stated that the hotel chains denied by Aviva Canada include Best Western, Home 2 by Hilton and Hampton Inn. The law firm filed the lawsuit on behalf of the owners of Home 2 by Hilton and Hampton Inn. Lerners has also invited other hotel owners denied coverage by Aviva Canada to join the class action.
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According to the complaint, Aviva is interpreting the coverage as only applying to outbreaks that happened “at or within the applicable area of the insured premises.” The lawsuit further alleges that Aviva said that “there is no coverage under the policy for business income losses resulting from the closure orders made in response to the current worldwide COVID-19 pandemic.”

The lawsuit is seeking $150 million, which includes loss of business income and accountants’ fees. The complaint also noted that each hotel has up to $500,000 of coverage through Aviva’s Hotel Program.

Brokers are seeing a surge of questions from both personal and commercial clients about what to do if they’ve been accused of facilitating the spread of COVID-19. There are increasing questions from clients about liability and umbrella policy coverage for COVID-19.

If someone files a lawsuit against somebody else alleging that they gave them COVID-19, that could easily become a protracted case in court. Consumers do get some personal liability insurance on their homeowners’ policy or condominium policy, but if they have a personal umbrella policy over that, then they have more layers of protection. As long as they didn’t intentionally give COVID-19 to somebody else, their insurer has a duty to defend them and cover defense costs.

Broker advising clients to make claims

Hub International is advising clients to submit claims related to the COVID-19 pandemic, even if there isn’t a physical damage loss. Business interruption has been the most-inquired-about coverage area over the last few months and although most general commercial policies contain BI exclusions for pandemic, each policy is different, and there may be something in a particular policy that allows a business interruption claim to go through. There is the challenge of triggering a BI claim that would normally happen following a physical loss or damage. 

COVID-19 losses are not viewed as a physical loss such as a hurricane or fire and most commercial policies have a virus exclusion. But Hub still advises clients to file claims anyways. They encourage everyone to report it from the beginning and let the coverage play out.  This way the insurer will acknowledge that a claim has been reported and if denied, it is on record. Insurance companies are taking extra time to review claims.

Of the many claims that have been reported, less than 50% have been denied with the rest not yet determined. Insurers are taking their time and giving their policyholders the ability to gather all that information about the loss, so they can make a proper decision. Included in the information that a client may need to gather would be a loss of income statement and any costs associated with getting the business ready to re-open in order to meet local health requirements.

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