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Corona Virus Insurance Considerations

Recent concern regarding the COVID-19 (coronavirus) has generated much public attention and has caused a significant change in travel, personal interactions and in guidelines prescribed by health officials on how to address this growing threat. As a result of this concern, I was recently asked how the Corona Virus would impact the insurance industry.

I have given this some thought and am prepared to share a few of these observations.

Let’s face it, it is only matter of time before someone in the vast field of American Litigant Wannabees, that someone will sue a restaurateur or movie theatre owner or whatever business when that person has obtained this deadly virus. I personally expect lawsuits against cruise ship companies to appear instantly.

Does Your Insurance Cover Corona Virus?

Business owners will want to insure for such potential events by adding endorsements to their policies which might come in several different forms. But here is the question: do environmental insurance policies cover losses arising from biological contaminants? There are a number of concerns, however, that the business owner will want to asses.

To fix insurance coverage gaps for losses associated with biological contaminants insureds will need to convince the underwriters of standard property and liability insurance policies to remove the coverage restrictions for bacteria–related losses or these same insureds will need to purchase an environmental insurance policy that actually works for biological contamination. Environmental insurance policies do have limitations, however.

In order for fungi, bacteria, or viruses, including the Corona Virus to be insured in the environmental insurance policy, all three need to be referenced as defined pollutantsin the definitions section of the policy. Including microbial matter as a defined pollutant in an environmental insurance policy which would encompass all types of fungi/molds/bacteria/viruses with fewer words and work just as well.

There are a number of hurdles to get over before there would be coverage for losses arising from the Corona Virus.

1) In property insurance policies, it can be difficult to show that there has been a direct physical loss arising from an insured peril in order for coverage to apply to a loss event associated with a virus.

2) General liability policies also have coverage glitches for losses caused by a virus. In the insuring agreement in the general liability policy, there needs to be an accident that leads to the loss. Where is the accident with a virus outbreak.

3) An endorsement that eliminates coverage for communicable diseases would apply to a virus outbreak.

By supplementing standard business insurance with a targeted policy for (for instance) food borne illness breaks, businesses such as restaurants might be assured that their costs will be covered.

Insurance for losses arising from fungi, mold, bacteria, and viruses is not reliable coverage in standard property and liability insurance policies. Although fungi and bacteria are now specifically excluded in most liability insurance policies, and sublimited in property insurance policies, it is unusual to see viruses as specifically defined “pollutants” in those policies. Therefore, there may be remnants of coverage for losses associated with a virus in general liability and property insurance policies that would not be there for fungi and bacteria contamination.

This is something business owners will need to discuss with their insurance brokers and agents. It would be best to begin that process now.

Who pays for your restoration services?

When a person experiences an insured loss,  one of the first things that they might notice is a restoration company coming out on behalf of the insurer. Sometimes, however, a homeowner might invite them out.

If the insured is the victim of a fire,  they might find that a restoration company might be listening to a scanner to gather the information that will help them land a job. Once a restoration company comes to a loss they typically will want to pack out the contents of the home, clean, and store them. These services might be quite expensive. Rarely if never does a restoration company offer an estimate before they begin these services.

One of the biggest misnomers I hear about restoration companies is that “the insurance company pays for their services”. The restoration company can get away with saying this because it does come out of the insured’s coverage from their insurance policy however it is not paid outside of that coverage.

What exactly does that mean? Let’s look at an example.

A client has an insurance policy with $150,000 worth of content coverage. The client has a fire at their home. The home is badly destroyed but there are some smoke damaged items that might possibly be able to be restored. A restoration company could come and pack out clothes and items that appear that they can be cleaned when in fact, some of the items taken should not and cannot be cleaned.

The restoration will clean these items and stores them until the repair work on the home is complete. The total bill for the restoration company is $15,000 for the packing out of the items, $10,000 for the cleaning of home goods, $10,000 for the textile cleaning, and $5,000 for the pack back (all of these numbers are incredibly realistic and common to what we typically see). The final bill from the restoration company is $40,000. That amount is paid directly to the restoration company FROM the insured’s policy. Therefore, the amount of coverage left for items that need to be “cashed out” is $110,000.

The insured is tasked to prepare a full inventory of the damaged items that could NOT be restored. The total damage is $200,000 and after depreciation, the loss is $150,000. The insured DOES NOT get a check for the full amount of damage. Remember, the restoration company gets paid off the top. The insured can only get the remaining $110,000 and the items that were cleaned. Many people find that the cleaned items are never the same after a large fire.

There is a time and a place for restoration companies and many people want to attempt saving some of their items. The question that needs to be asked is how much is it going to cost and would you rather pay a company that or be paid that directly?  Restoration services are expensive and an insured has a right to know what THEIR insurance policy is going to pay for those services. No person would ever purchase a car without knowing how much it will cost. That is the same way that you should treat restoration services as the cost is usually pretty close to the purchase of a car. You,  as an insured,  have a right to obtain an estimate of services before you agree having your items packed out, cleaned, and stored. Once you have the estimate you can choose to hire a restoration company to do the work or you can ask to be paid directly for the services they would supply based upon the estimate.  At that point you can choose how you want to have the work completed.

Following this method is especially handy if you have low policy limits or you have a claim that is close to those policy limits. The biggest thing to remember when you have an insurance claim is that you have rights. It is your contract with the insurance company. A contract of insurance is a two-way street where both parties have rights and obligations. Every decision you make will impact your total claim. Do not feel pressured to go with a restoration company immediately. If it were me, I would secure my home and belongings, get an estimate, and then make an educated decision. Remember, if someone tells you that, “the insurance company will pay for it” what they actually mean is YOUR insurance policy will pay for it.

Pays to Read your policies, contracts and agreements

I was raised in a public adjusting family. Being part of this family meant that I heard the words, “read the policy” a lot. I was taught that you should know the insurance policy like you know your Bible or if the Bible isn’t your thing, like the back of your hand.

Last year Donelan Andrews purchased a $400 travel policy from Squaremouth. She read the terms and conditions of the insurance policy right away. Inside the policy she found a provision that allowed a $10,000 prize to the first person who read and contacted the company with their find. Squaremouth called it the “Pays to Read” contest.

Part of the way we win our insurance claims is by reading the policy and using the language of the policy to hold the insurance company accountable for their own words. Doing this day in and day out you soon learn to read the fine print in your every day life as well. Reading the fine print is one of the most empowering things you can do in your life. Too often we are willing to accept injustices because we think we have no power to change our situation. Reading your contracts empowers you to either argue for what is due to you or gives you the assurance that you were not being taken advantage of in the first place. Either is empowering and freeing.

The following are three examples in my own life where I read the contract.

I purchased a new home. The home was a new build and we were purchasing straight from the builder. In one of our final walk throughs I noticed there were no towel bars or rings. I messaged the realtor and customer service team and they both responded that towel hardware is not provided by the builder. The realtor even responded by saying, “I know it’s weird but we stopped doing that a few years ago.” I then spoke with the construction supervisor on site who also said that the towel hardware would not be provided. I pulled out the long real estate contract and provisions and found where it stated what color the hardware would be. I forwarded the language and I am now living in a home with installed hardware!

My children are part of a soccer club. Over the last year I have felt frustrated by some of the management and processes I have seen. Other parents also expressed their concerns to me. I heard about a plethora of letters that were sent to the board to have some of these things addressed which never were. One day I mused that there must be something that actually holds the club accountable. I found the club bylaws and discovered that the club was required to have delegate meetings which would allow for every team to assign a delegate to represent their team. This would allow the delegates to attend meetings and have a vote in club business as well. Within months of bringing this to the board a delegate meeting was held. Complaints that were falling on deaf ears were now actually being heard.

A few years ago, I signed up with a chain gym. During the time period of the contract I underwent shoulder surgery. I contacted the local franchise to try and stop my membership. The club refused to stop or refund my membership fees. I talked to associates and the manager. They contended that they did not have to end my membership because of a surgery because there were accommodations they could make around the injury. Once I reviewed the contract I found the exact language that I was able to provide to the headquarters to get the contract cancelled and my prepaid monthly dues refunded.

There are other times when I haven’t won. Once I waited too long to submit a health insurance claim. It was denied. I read the policy and the time period of which a claim can be made was clearly less than the time I turned mine in. While I was disappointed in myself for not filing the claim in a timely matter, I at least had peace that there was nothing more I could do and that the company was honestly handling the claim.

Take control of your life and circumstances by committing to reading your policies and contracts. If you don’t do this before an issue arises it is not too late.    You might not ever find a $10,000 prize winning contest in your policy but you’ll find that it always pays to read those agreements.

Everything starts and ends with the insurance policy as it is the legal contract with the insurer. As my dad says, “the policy giveth and taketh away”.