RiskGenius has estimated that roughly 80% of P&C commercial insurance policies (this includes both property and casualty, collectively) will not have a virus or communicable disease coverage or exclusion clause. This means these policies could be read as being “silent” as to whether losses arising out of communicable disease would be covered. RiskGenius is calling this the Silent COVID Coverage issue.
To be clear, the legal consensus of coverage attorneys is that a majority of commercial property policies include both virus exclusions and requirements for physical damage or loss to property, both of which would preclude insured recovery stemming from COVID-19. I have no reason to dispute these legal opinions. We do anticipate that courts and legislatures will challenge these interpretations.
Based on our analysis of policy data, we have estimated that a majority of commercial casualty policies do not include virus exclusions (and obviously do not require physical damage or loss since they are not property policies).
This has parallels to the Silent Cyber issue plaguing the commercial insurance industry. Namely, many commercial insurance policies did not include coverage or exclusions for cyber events. As a result, these “silent” policies could read to cover cyber events that were not contemplated at the time the policies were drafted. The obvious similarities between computer viruses and coronavirus are also notable.
However, the impact of Silent COVID Coverage will likely dwarf the Silent Cyber Coverage issues:
- Great Frequency. The silent cyber risk might affect a business or it might not (if you never get hacked, etc.). Whereas, the Coronavirus is definitely going to directly or indirectly impact a large number of businesses. So the exposure for carriers could easily be much greater from a claims-made perspective.
- Greater Intensity. The impact, and thus claims made, for silent cyber will occur over the course of years, which means carriers’ losses will be spread out. But the COVID claims will all occur over the next year.
As a result, the RiskGenius team is closely evaluating insurance policy language for “Silent COVID Coverage.” This new type of silent exposure exists for carriers when a policy remains “silent” on communicable diseases. While many attorneys believe other provisions in a Silent COVID policy would exclude coverage (e.g. physical damage), the RiskGenius team believes this issue may arise in claims and litigation. We are advising our customers to get a handle on this topic immediately.
In order to aid insurance professionals, RiskGenius will be releasing iterative Silent COVID Checklists to assist in the industry-wide analysis of commercial insurance policies. These are the same Checklists that are embedded in the RiskGenius software application in order to run automated policy checks.
We will be releasing more information in the coming months.