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Coronavirus and Insurance Claims – What You Need To Know

Humanity is currently facing one of the largest widespread health crises in modern times. You can be confident that Stock and Leader stands beside its clients and will help you navigate these unchartered waters.

The outbreak of coronavirus disease 2019 (COVID-19) has touched every American’s life.  Travel restrictions have been imposed, schools are closed, businesses are closing, self-quarantining is becoming the norm – one cannot even buy a bottle of wine at the liquor store.  Many Americans will likely face layoffs, furlough, and unemployment.  Businesses are facing empty buildings and decreasing demand for their products and services.  There are daily runs at grocery stores on products we often overlooked or took for granted.  We have even been introduced to the new term, “social distancing” and are taking every precaution necessary to “flatten the curve.”We, as Americans, have a tendency to insure many of our assets.  Assuredly, there will be opportunities to make claims and seek payment for losses associated with this disease from your insurance company.  The COVID-19 pandemic will likely present never before seen claims – and “claims-handling approaches” by the insurance industry.

With a background in insurance litigation, I have been fielding a number of calls from family, friends, and clients inquiring into whether insurance will cover certain claims and losses due to the COVID-19 pandemic. I do not know how the insurance industry will respond to the upcoming avalanche of claims in the coming months.  I can only predict how these claims are likely to be handled based upon my experience with pre-COVID-19 claims.

It is my hope that this article will make you better informed of some of the possible situations you may face when submitting a claim.  I foresee a plethora of potential claims being submitted in response to this horrible disease.   Two of the most common claims are going to be travel insurance claims and business interruption insurance claims.  Regardless of the title of the claim, each claim will boil down to one simple question:  “Will my insurance company pay for my loss?”

Unfortunately, there is no clear answer to this question at this time.  However, Stock and Leader is here to help you submit your claims and pressure the insurance company towards a resolution of your matter.  The time to prepare for the claim is now!

Knowledge is empowering.  Here are four things you can do to become more knowledgeable and empower yourself before submitting a claim.

  1.  Know your insurance policy.
Take 15 to 20 minutes and review the plain terms of the policy. If this seems to be a daunting task, contact your insurance broker, agent, attorney, or the insurance company directly for an explanation. By thoroughly reviewing the terms of your policy before submitting a claim, you will have a better understanding at what you will likely be up against when submitting your claim.
  1. Understand “claims processing” in its simplest form.

The claims handling process is relatively complex.  Though you do not need to know the interworking of the insurance company claims handling process before submitting a claim, it is helpful to know how the claim may be handled.

From my experience, smaller claims are more likely to be paid first before more complex or larger claims.  Complex smaller claims and larger claims will often linger.  This practice is largely due to the documents needed to substantiate the loss.

If you believe that you will be likely submitting a claim in the near future, now is the time to begin to document your file, obtain all necessary estimates, accounting documents, past tax returns, etc.  The preparation you take now, may significantly benefit you once the claim(s) has been submitted to the insurance company.  Once the claim has been submitted this is where you may have a fight on your hands.

  1. Prepare for hurdles in payment.
Insurance companies are in business to make money, not pay it out.  Because of this, especially in the climate we now find ourselves, the insurance companies are going to hold onto money that you may otherwise be entitled to as long as they can.

There are different strategies that carriers employ to delay payment.  They may require submission of the same document several times; the assigned insurance adjuster may require quotes and estimates from third parties; the claim may be reassigned to several adjusters, the insurance company may rely on unfavorable data produced by the insurance industry, and/or the insurance company may just flat-out refuse to return your call.With this as the backdrop, should you decide to handle the claim on your own without the help of a lawyer, be your own advocate.  Make the insurance company jump through the hoops – make them pay what you are owed.  You have not been paying your premiums for nothing.  Above all else, do not fold to the pressure of the insurance industry.

  1. Seek an attorney’s help.  
The cards are stacked against you – and that was before COVID-19 exploded.  The insurance industry is going to be overwhelmed with claims relating to COVID-19.  It is not known what their response will be at this point, but you need a game plan.  An experienced insurance attorney can help you navigate these unsettled and unchartered waters.

Leading up to the point to when counsel is retained (now), become a good historian.  Take notes during every conversation you have related to your claim.  Compile your material and obtain documents necessary to help your attorney better document your case to the insurance company.A seasoned insurance attorney can be an invaluable tool in the process leading to a claim being covered and paid when it may have otherwise been denied.

The insurance industry may take several paths with submitted claims.  In the first approach, the insurance industry, as a whole, may recognize that the American people are facing a significant economic crisis and will endeavor to be philanthropic in the handling of the claims.  In this case, many claims may be recognized and paid.  Let’s hope this happens.

The insurance company might also take a draconian approach to submitted claims and deny the vast majority of them.  In this scenario, claims are likely to be denied for a number of reasons.  First, in almost every insurance policy there is a requirement of “direct physical loss or damage.”  While this disease is causing workers to stay home, events to be cancelled, and complete business closures, the person who is making the claim will likely not be determined to have sustained a “direct physical loss or damage” to their business, etc.  In other words, there is no physical damage to the business, loss of income, planned vacation, etc.  Second, and more likely the reason for denial of a claim, is a “force majeure” provision within the terms of the insurance policy.

In nearly every insurance policy there is  a provision known as a force majeure clause.  You may even have heard it referenced as an “Act of God” provision.  This clause relieves the insurance company from performing their contractual obligations (e.g., payment of a claim) when certain circumstances are beyond their control, making performance inadvisable, commercially impracticable, illegal or impossible.

Insurance companies around the world are likely to deny many submitted claims based upon the force majeure clause within the policy, arguing that COVID-19 was an unforeseen event; and, therefore, any claims arising because of COVID-19 are not covered losses.

The third approach lies somewhere in between a benevolent and a malevolent insurance industry.  In my experience, the following is likely to be the approach the insurance companies will employ.  In this situation, some claims will be denied for, among other things, the lack of physical impact and a force majeure provision.  Claims that are likely to be denied outright are those claims submitted by unrepresented individuals/businesses.

There are situations where claims will be paid despite the lack of impact and the existence of a force majeure provision.  A seasoned attorney will look to the developments in federal law, the restrictions, the closures, the Executive Orders and Declarations of Emergencies and utilize them to overcome the lack of impact argument and more importantly the existence of a force majeure clause.  You can overcome many of the obstacles that the insurance company has put in place with the help of a seasoned insurance attorney.

The attorneys at Stock and Leader recognize that everyone is struggling with the uncertainty of the COVID-19 pandemic.  Many individuals and businesses face decisions about how to move forward and function in a time of absolute uncertainty.  Like all of you, we do not have the answers for every questions. We are striving to learn as much as we can and quickly as we can.  Stock and Leader is here to help you through these difficult and uncertain times.  Our focus is on you.

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