A messy business
Deserted streets: New York’s Park Avenue towards Grand Central Station at the height of the shutdown on May 12
Business interruption coverage amid the COVID-19 crisis has sparked furious rows at home and abroad By John Deex and Wendy Pugh
I
t may seem obvious to those within the industry that insurers cannot cover pandemic-related business interruption (BI) claims. You can’t just go paying claims when you haven’t collected premiums – and this has been the case since reinsurers began excluding pandemics following the SARS and MERS outbreaks some 15 years ago. It would seem to make sense too. Insurance works best when the many pay premiums to cover claims by the few. If everyone is claiming, then the system falls over. Even with large-scale natural catastrophes, where there will be many thousands of claims, events are restricted to one geographic area. Reinsurers can diversify their risk. “Logically you can see why [insurers] wouldn’t want to pay for something that in the worst case
scenario is going to affect every business,” claims manager Sedgwick told Insurance News back at the beginning of the crisis. What is more, BI cover just wasn’t intended to cover this scenario. BI almost always responds when there is physical property damage at the insured’s premises. An infectious diseases extension is available, but even this is designed to cover localised outbreaks of illnesses such as Legionnaire’s disease. Pandemics are excluded – or so we thought. Unfortunately industry “logic” has not extended to those whose livelihoods have been taken away, and as ever with insurance contracts, it comes down to precise wording. No pandemic insurance issue has caused more anger in the US and Britain than the realisation that most BI policies won’t help restaurants, pubs and shops left
insuranceNEWS
June/July 2020
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