It's Time for a Second Look at Covid-19 Claims
Time for a Second Look at Covid-19 Claims
First Reactions to Covid-19
The claims for Loss of Earnings just kept coming into the office where I worked as a Claims Adjuster. The claims were from our Restaurant and Hotel Owners which we insured and were the result of the Covid-19 Pandemic, and the order issued by our Governor to close down operations to hopefully prevent the further spread of the Virus.Ballotpedia.org stated that between March and April 2020, 43 State Governors issued orders for people to stay at home and for nonessential businesses to close due to the virus.
In an effort to make sure the Covid-19 claims were handled correctly; they were referred to an Insurance claims coverage attorney to make sure the correct policy analysis was made claims and that the claims were evaluated properly.
Legal Opinion
To my surprise the decision to deny each claim for Loss of Business Income was to be denied, due to the fact that no evidence of “direct physical loss. Could be found. In addition, it was determined that it would not be necessary to complete an on-sight inspection of the insured’s business location. When I questioned this unusual claim handling procedure I was told “it was not necessarily due to no direct physical damage being present.
When the Covid-19 Pandemic struck I was into my 40th year as a Claims Adjuster, having worked that whole period in Southern California. During that time, I investigated and evaluated catastrophe claims and I can recall seeing Insurance companies literally bend over backwards in order to find coverage under the policies for fire, earthquake or flood victims, but now all we had to do was to confirm with the named insured over the phone the lack of direct physical loss and then send the denial.
Loss of Business Income Endorsement
The endorsement which is designed to cover Loss of Earnings for a business is called the Loss of Business and Extra Expense Endorsement. The Endorsement states that for coverage to apply evidence of direct physical loss or damage is required. The method of determining lack of coverage for these claims is suspect for the following reasons.
Reasons To Revisit the Denials
The first reason is that the presence of the microscopic elements of the Covid-19 Virus can constitute “damage” to the named insured’s property creating a situation in which cleaning and restoration would be required. But if you do not examine the risk to determine its condition, you will not know if the loss can be covered or not.
The second reason is that “damage” in the policy form is not defined, but other insurance words are defined. Insurance is specialized; however, it is not specialized to the point where it can change the meaning of words in the policies sold to the insureds.
Good Faith Handling
For decades, the Insurance Industry observed the adjustment practice of trying to find coverage for their Insured’s claim, then if they could not, the claim could be denied in good faith. The denials issued for the Covid -19 Loss of Business Income, needs to be examined again and not with the concern of how it will impact the financial statements of the insurance industry.
After a 40-year career as a Property Claims Specialist in Southern California, I believe it is now time to Put the Insured First.
Respectfully,
Norman Lambe