Although a few construction policyholders may find wording in their policies that justifies a claim, most contractor insurance won’t cover business interruption costs from a viral pandemic. Exclusions, with different wordings, block that kind of coverage.
Clearly, insurers meant to remove it from policies after Zika, SARS and MERS and other recent epidemics and pandemics.
Lawmakers in several states now are trying to pass laws to force insurers to pay, but they are fighting back. We’ll see where that goes.
The upshot is that business interruption insurance for contractors, which generally requires property damage covered under a builders’ risk policy, can’t be counted on to pay for losses caused by a virus.
But there was an insurance policy and coverage for a virus pandemic if you looked hard enough and made a purchase when it first appeared three years ago. (ENR did not note it at the time nor was it in the Risk Review newsletter.)
On May 21, 2018, S&P Global, the former parent company of ENR, reported on a new insurance product from broker Marsh in collaboration with carrier Munich RE Co. and Metabiota Inc.
Calling it PathogenRX, the coverage trigger is linked to a Sentiment Index, which provides analytics into infectious disease outbreaks. Policyholders are able to model their potential financial loss and can customize coverage for specific expenses, geographies, types of disease or portions of a calendar year.
“In the non-property damage (business interruption) world, pandemics have traditionally fallen out of the scope of what can be identified and measured for a policy,” Jen Bruursema, a former vice president of marketing and sales at Metabiota, told Business Insurance, an industry publication in 2018. “That’s because pandemics are very difficult to predict in terms of where they’re going to emerge and how long they’re going to last.”
“Clients can see the index,” a Marsh executive also told the publication, “and if something happens anywhere around the world, the index is adjusted. It’s very, very simple.”
Not that many policies were sold, from what I can tell.
You will be reading more about insurance for viral outbreaks on ENR.com in coming months—about premiums, limits and triggers.
Parametric Viral Outbreak Insurance
But instead of an index based on public perception of the threat, I would like to see companies buy an insurance product more like parametric weather insurance, which is tied to an index of rainfall or snowfall. Michael DeLio, broker Aon’s director of analytics, says that such a product could be used to cover partial or full business interruption and can be designed to pick up additional expenses when needed.
“The triggers,” DeLio adds, “can be designed around the insured’s concerns, such as a World Health Organization pandemic/endemic issuance or regional infections and/or mortalities related to a disease.”
Now, of course, inquiries about such coverage are frequent. Would it help you? I imagine that depends on the cost and what you estimate could happen to your business in the future.