Paperwork Pandemic
COVID-19: Lawmakers Should Protect Businesses Filing Business Interruption Claims
By Steve Acunto, Justin Foa, with others
Pre-emptive legislation could stem the tide of a massive amount of COVID-19 related paperwork that is about to flood the insurance sector, having no discernible purpose and many bad implications for business clients. The 130 year-old Insurance Advocate has called it the “Interruption Eruption.”
Many business insureds believe that they have had possible business interruption losses, and it is feasible that COVID-19 related interruptions are covered under their insurance policies. Insurers, for the most part, have already asserted that coverage is not triggered by COVID-19 per se because COVID-19 did not damage nor cause physical damage to whatever property is insured. Most insureds are not sure when their loss began, how long it will last and whether the courts or regulators will change the position of insurance companies. As it stands now, nothing short of litigation or executive mandate will spur an insurance payment for most business interruption claims resulting from COVID-19. One thing that has become very apparent is that insurers are trying to get insureds on record so that the circumstances of their claims are documented.
On the other hand, insureds, insurance brokers/agents, claims people, and attorneys are steering insurance brokers/agents to put insurers on notice so that late reporting of a business interruption claim to an insurer does not prejudice a claim. To avoid liability, insurance brokers and agents must comply.
This claim reporting will dwarf the claims-load of every single natural disaster in insurance history. Every insured, in every location, has been or will soon be affected by this awful virus. The flood of claims and counterclaims will be a mountain of inefficiency in paperwork.
The proper claims process requires every insured with a business interruption policy to put the insurance company on notice that there might be a claim. The claim will have to be made to the insurance broker/agent and a copy kept by the claimant; then, the claim must be entered into the claim system of the insurance broker/agent, and, after that, the claim must be entered into the claim system of the insurance company. Subsequently, the insurance broker/agent will have to go back to the insured and request additional claim information.
Legislators or Regulators could reduce this massive data entry burden and assist insureds, insurers and brokers/agents by preemptively asserting that insurers are “on notice” from every insured who purchased a policy that covers business interruption that they might be claiming business interruption due to COVID-19.
Relieved from the burden of unnecessary data entry, insurance brokers/agents could then intelligently assist clients. In the very small number of instances where coverage is clearly available, insurance brokers/agents will have time to assist insured clients to make claims. In the vast majority of instances where insurers have made their declination known, insureds would have the freedom to wait and see how the courts and regulators address the issues without the prejudice of late reporting hang over their heads. In addition, insureds could avoid fully presenting their claims to insurers before the process plays out, and paths to coverage become clearer.
Without help from legislators and regulators, all insured clients, insurance brokers/agents, and insurance companies are trapped by current procedure and law to file and respond to what will amount hundreds of thousands notices that serve no purpose other than to be a placeholder for the opportunity to take action in the future should circumstances warrant.
Legislators can relieve this burden and protect businesses and assist the other parties in claims resolution.
C. Justin Foa, CPCU, ARM, is President and CEO of Foa & Son, a fifth-generation international insurance brokerage. President of the Insurance Brokers’ Association of NY State, board chairman of The Tanenbaum Center for Interreligious Understanding, he is a member of the Young Presidents’ Organization (YPO).
