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For Many Casualty Events, There Is Insurance

Written by: Scott H. Harris

3/20/2020 (and published in the Portsmouth Herald on 4/2/2020)

There is insurance for many casualty events.  The question is whether insurance can help with the current crisis.  The answer: maybe. 

There are a few rules that apply to the interpretation of insurance contracts that you should have in mind when you dig out (or have your broker dig out) the policies that might provide some financial relief. 

First, when courts interpret the terms of an insurance contract, they construe them against the insurance company.  The insurance company has the ability to choose its words carefully, so if the words it selects create ambiguity, the burden of that ambiguity falls on the insurance company.  Therefore, if policy language can be construed to cover a risk, then there is coverage, even if the insurance company has a good argument for why the ambiguous policy language should produce a different interpretation.  In other words, the policy holder wins when there is a reasonable “tie” between the policy holder and the insurance company in their respective contractual interpretations. 

Second, plain language in a policy applies in the context of the policy as a whole so that the result is a solid, practical one.  Put simply, while courts construe ambiguity against the insurance company, they will not strain to find that ambiguity. 

Third, you need to read through the whole policy before deciding whether you have a shot at coverage.  The first part of the policy spells out the terms and conditions upon which coverage exists, and the latter part of the policy identifies which of those otherwise covered risks are excluded from coverage.  Reading the exclusions carefully is important since many policies exclude items like wartime risk and disease.  Policies vary greatly, so you need to review your policy carefully.       

There are several types of policy that may cover the risks presented by this pandemic.  Business interruption and contingent business interruption insurance, at least by their titles, sound promising.  Businesses, supply chains—frankly, the world as we know it—have all been interrupted (and that’s putting it charitably). 

In general, “business interruption insurance” insures against losses incurred when physical loss or damage caused by a peril not otherwise excluded by the policy causes an interruption of business (and, again, policies may specifically exclude coverage of losses caused by disease).  “Contingent business interruption,” as distinguished from pure business interruption, applies when the same risks befall, for instance, a supplier, which, in turn, interrupts the insured’s business.    

Of course, businesses that have closed because of this pandemic have not closed because of what would ordinarily be considered “physical loss.”  Courts have, however, upheld coverage where the premises was deemed uninhabitable because of bacterial or other similar contamination---probably a stretch of an argument where coronavirus closures are concerned, but given the rules of insurance contract interpretation, likely still worth some consideration. 

Business interruption policies may also specifically cover loss due to interruption by a civil authority.  This provision expands coverage to those instances where access to a business is prohibited by a governmental order.  Ordinarily, civil authority clauses limit the extent of coverage to a fixed period of ordered closure.   There will be questions raised in the application of this language.  For instance: Has the business closed to the public where remote delivery is still allowed?  Is the business closed where employees are trying to work remotely? 

Another place to look for coverage is so-called “all-risk” insurance.  “All-risk” coverage applies to the type of risk not ordinarily present under other types of insurance.  Recovery is allowed under “all-risk” policies for fortuitous losses not usually contemplated.  Given the potential breadth of such coverage, “all-risk” policies include copious exclusions so that the insurance company does not become an the insurer of “all-losses.” If you have “all-risk” coverage, it may well cover this once in a lifetime risk.

Workers’ compensation may also apply to employees sickened by the virus.  While workers’ compensation will not cover the risks of getting sick suffered by the population at large, it is meant to cover workplace injury.  One could argue that certain workers who are required to interact with the public, including those with coronavirus, suffer workplace injury when they are disabled by that illness.  

These are possible areas of coverage.  To the extent that you believe your policy covers your coronavirus losses and the insurance company disagrees, you may benefit from statutory provisions in New Hampshire, Massachusetts, and elsewhere that allow an insured who is wrongly denied coverage to sue and, if successful, to recover their attorneys’ fees and potentially other damages for the insurance company’s wrongful denial of benefits.  

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