COVID-19 is nothing short of a hurricane that hit all 50 states at once, at least according to insurance defense attorney Steven Badger who represents commercial insurance companies in disputes with policyholders. One would assume that this pandemic should not affect your insurance claim for property damage from hail or water damage. However, that does not seem to be the case. The truth is far more grim.
Commercial insurance companies hold more than $600 billion in reserves. This is more than plenty to keep business running as usual while covering insurable events. To be an insurable event, there must be a basic and reasonable expectation that an insurance company could afford to pay out losses on a widespread scale. As claims and their respective values go up, premiums rise to subsidize the cost of insurable losses. That is basic economics. Once an event is determined to be insurable, a policy may either cover or exclude that event. For example, most open perils policies we come across in the work day cover hail damage – however it may present itself. Hail damage is an insurable event, even on a wide scale, and it is thereby insurable. A global pandemic, however, is anything but business as usual. Most standard insurance policies label a pandemic such as COVID-19 as an “uninsurable event” and therefore exclude coverage for it from most business owner policies. According to Badger, “The entire concept of insurance depends upon just a few people having losses that everyone contributes to with their premiums. The concept doesn’t work when everyone has the very same loss.” Out of 84 insurance companies in Washington state, only two offered coverage for a pandemic like COVID-19 (OECD 2020).
While I can’t speak to the insurers that unwittingly covered COVID-19 losses in their policies due to a catastrophic failure of imagination (and our firm will proudly represent our clients to recover for these losses), most policies simply don’t cover them. Tragic as the losses may be, under most policies, a pandemic such as this is excluded from coverage due to its non-insurable nature. That is a bummer for them, but this should never trickle down to policyholders with sudden and accidental property damage, right?
Sadly, this is not the case. State legislatures are considering legislation to retroactively amend insurance contracts to cover COVID-19 related business losses. It would be greatest redistribution of wealth of our time. While I am no friend of the insurance companies, and I believe that my name is probably on some insurance company hit list somewhere, even I will admit that redistribution of privately held wealth would be exactly what legislation like this amounts to. If approved, and if it survives constitutional challenges, such legislation would be the greatest gold rush of our time for public adjusting firms, law firms, and the clients we respectively represent. However, it would surely bankrupt the entire insurance industry. A bankrupt insurance industry is very bad for my clients, and the industry as a whole, because that leaves nowhere for policyholders to turn when they have a loss that is explicitly covered by their policy.
So what does this mean for you, the reader? If you are reading this and you are frantically searching the web to see if your business is covered for its COVID-19 related losses, my unfortunate answer is probably not. However, I would assert with authority that there are no firms out there willing to fight as hard for our clients as Friedman & Associates. Let us review your policy, and if there is a hole in the armor, we will find it and we will get you paid. For the rest of you who are here because of a non-COVID-19 related property loss, what does this mean for you? It means that insurers are scrambling to prepare for what may be the greatest wealth redistribution of our time, with them being on the losing end of it. It means that your claim proceeds may very well be unfairly being treated as reserves for other losses, and held back from you in the process.
Much like American Airlines discovered that removing one olive from every passenger’s plate would save them almost $40,000, imagine how much insurers could save by reducing your claim value (and every other claim value they can) by as much as they can get away with? As a policyholder, you have paid your premiums like you should. If you have a valid claim that you bought insurance to cover those potential losses, then over my dead body will your insurance company keep your money to cover their other losses. You have bled premium dollars for long enough – don’t let the big insurance companies use you to stop their own bleed when it is time for you to collect. Approaching your insurer with proper representation has always been critical to proper settlement. However, there has never been a more critical time to go to your insurance company with the level of representation it is going to take to win. Don’t let your insurance company control the process, whisper sweet nothings in your ear, pay you a pittance of what you are owed, and convolute the claim beyond the point salvage in the process. Before you even dial the 1-800 number to start the ball rolling on your property damage claim, set yourself up for success by calling us at 833-8-SETTLE. In the meantime, stay safe and stay well in this difficult time.