Insurers bracing for coronavirus losses

Businesses are increasingly forced to mitigate any potential effect from the coronavirus outbreak originating from Wuhan, China, which could have a serious effect on business as organisations are increasingly forced to mitigate any potential impact, US-based Crowell Moring (CM) warns.

CM partners Laura Foggan and Mark Myer, and associate Michael Sabino said in an alert insurers would play an important role in the recovery from the coronavirus health crisis. They would need to investigate, process and pay valid claims from a wide variety of policyholders.

“Although many business losses may be insured, there also are important limitations on the scope of coverage afforded for business interruption and contingent business interruption losses,” the lawyers said. “These interruptions to normal business operations are serious and have real financial implications for individual companies and the economy.”

Global financial markets had already reacted to “the ripple moving through international trade routes” because of factory shutdowns and new regulations stopping or slowing goods movement out of China and the surrounding nations.

CM warned that, apart from the direct business losses in the outbreak’s immediate area, “corporations and their insurers must take care to evaluate additional exposures several steps removed from Wuhan”.

Some estimates projected the virus’s health impact would be felt well into 2Q20 and companies and insurers would continue to feel the economic effects of shut-down operations and the anticipated delay of Chinese imports/exports well into the future.

The coronavirus outbreak and resulting losses would give rise to important coverage issues, particularly over recovery for business income losses. Insurers would need to evaluate resulting claims carefully according to insuring agreements, exclusions, conditions and limitations in policies, and the facts of each claim.

The Chinese and other governments had restricted operations, travel, as well as imports and exports. For that reason, some commercial policyholders might look to the civil authority provisions in their policies for lost income and extra expense coverage.

Civil authority provisions might cover loss of business income and necessary extra expenses caused by civil authorities prohibiting access to the insured premises, while an ingress/egress provision might cover loss of business income when access to policyholders’ premises was prevented.