COVID-19 pandemic beyond scope of business interruption coverage, says lawyer

The battle over claims heats up between small businesses and insurance providers

The excerpted article was written by CBC Radio

COVID-19 is not the first crisis to hit Krystal Churcher’s private preschool, a business she managed to grow substantially after surviving the 2016 wildfire in Fort McMurray, Alta.

What’s different this time, compared to several years ago, is that her claim for business interruption insurance got nowhere.

Churcher’s insurance company told her the pandemic is not a “named peril,” meaning it doesn’t fall into the same category as threats typically covered by insurance, such as windstorm, fire or even a plane falling from the sky.

“What are we paying for with these insurance premiums?” said Churcher, who owns the Early Start Learning Centre in Fort McMurray. “It just makes no sense to me.”

Across the country — and indeed around the world — small business owners are grappling with denied claims which are collectively worth billions of dollars. And they’re fighting back in the courts, with lawsuits popping up in Canada, the US, Britain and other countries.

I’m sitting here with no coverage and not really any explanation as to why.– Krystal Churcher, owner of Early Start Learning Centre

In Churcher’s case, she was paying extra to have viruses included in her coverage, but since none of her seven staff members got sick from the coronavirus, that part of her policy was not triggered.

“After the fire, I increased my insurance policies as much as they would allow,” she said.

“My premiums have gone up over 300 per cent since the fire, and I’m sitting here with no coverage and not really any explanation as to why.”

Pandemic not part of insurance calculation

Every insurance policy is unique, and while here is no such thing as a one-size-fits-all contract, the principle of insurance is the same.

“The premiums of many are paying for the losses of the few,” according to the Insurance Bureau of Canada.

Tragic as the 2016 wildfires were, making up the priciest insurance claims in Canadian history, the disaster only affected people in Northern Alberta.

Insurance customers in other parts of the country were fine, so their premiums were used to help pay for losses in Fort McMurray.

How can an insurance company afford and price to pay for something that is not temporal in time and is not in a geographic scope?– Laurie LaPalme, partner in the Insurance & Reinsurance Group at Cassels Brock & Blackwell.

What’s different about a pandemic like COVID-19 is that it absolutely affects everyone from coast to coast to coast, according to Laurie LaPalme, partner at law firm Cassels, Brock and Blackwell in Toronto, whose clients include insurance companies.

That kind of universal scenario was never baked into the insurance formula.

“Always go back to the contract to see what it says,” said LaPalme.

“Most contracts exclude viruses of that nature so they are not a peril that is covered. and it’s not meant to be, because pandemics by their nature are not temporal and they are not geographically scoped. So how can an insurance company afford and price to pay for something that is not temporal in time and is not in a geographic scope?”

Battle over the fine print

Enough people disagree over the issue that firm Merchant Law has started collecting names for its class-action lawsuit against more than a dozen insurers in Canada.

A legal battle is also heating up south of the border, where politicians in several states are proposing legislation to force insurance companies to pay out business interruption claims.

American lawyer Chip Merlin, author of the book “Pay Up! Preventing a Disaster with Your Own Insurance Company,” argues insurance contracts are written in a way that is full of contradictions which aren’t always fair to small businesses.

“if you were a small business owner, as you read down they have a provision for business interruption, loss of business income, and then a specific part in bold letter that says, ‘we cover you for orders of a loss of income caused by civil authority,'” explained Merlin.

According to Merlin, many insurance companies are saying businesses must be shut down due to a direct infection by the COVID-19 virus before they will pay out on a claim.

“Most people read that and go, ‘Hey look I got coverage because a civil authority shut me down.’ But it’s in the fine print that insurance companies are coming back and making the argument saying, ‘Wait a minute! You know in order to collect for this you have to prove that a business closed by you or some property closed by you actually had the coronavirus before you’re able to collect on that.'”

Court battles, according to Merlin, will come down to the one thing that he says  “nobody ever reads or thinks about in advance.”

In other words, the fine print.

“Even if you were to try to read it, would you really understand or do you have to be somebody like me that does this for a living?” said Merlin.

The lawyer says we should get ready for a whole lot of arguments over what qualifies as a “named peril,” whether COVID-19 causes “physical damage,” and what constitutes “loss” as defined in the contract language of an insurance policy.

Potential losses could far outstrip collected premiums

The stakes are high for both insurers and the insured in this situation. For Krystal Churcher and her Alberta business, it’s the difference between being able to pay her bills, or go into heavy debt.

Her insurance company has pegged her loss at $55,000 a month. As she’s unable to collect money through an insurance claim, she’s had to apply for a federal loan instead.

“It’s just a huge bill that’s sitting there when you have insurance policies that are supposed to help you during these kind of things,” said Churcher

But for the insurance company, the financial consequences are stark too. Multiply Churcher’s scenario across the country, and the potential liabilities are so potentially big they could cripple the entire insurance industry.

Canadian insurers have yet to put up an estimate, but the American Property Casualty Insurance Association published an alarming report in April, pegging small business losses in the United States ranging from $255 billion to $431 billion per month. 

That is substantially higher than the total pool of premiums available for commercial property risks, which that report put at only $6 billion per month.

CBC Radio

How do you process a million EI claims?

The excerpted article was written by Peter Zimonjic · CBC News

Experts say when it comes to the Herculean task of pushing close to one million employment insurance payments out the door in a short period of time, it’s more important to get it done fast than it is to get it done perfectly.

Last week, nearly a million Canadians applied for EI benefits, according to media reports, after they were left jobless when governments across Canada shut down most non-essential businesses in the country to prevent the spread of the coronavirus.

In typical economic downturns, the job numbers tend to decline steadily over a period of time, giving the federal government time to ramp up the ability to respond with each worsening week. But we are in unprecedented times now.

The era with the second highest number of claims was 1957, when, according to Statistics Canada, 499,213 Canadians filed benefit claims in a single month. The early 1990s recession also had several months of record claims in the 450,000 range, but nothing has come even close to the number of claims now being submitted.

More recently, the monthly number of EI claims was between 236,530 and 245,240 between August and December of last year, according to Statistics Canada.

With rent due at the end of the month for many people, the federal government finds itself in the unenviable position of trying to ramp up its processing efforts, right when many of its own employees are being forced to work from home to stop the spread of COVID-19.

To meet that demand, the federal government has augmented its EI processing workforce of 3,500 with an additional 1,300 employees from other departments, such as passport processing centres.

Employees performing investigations and reassessments on EI claims have also been moved to claims processing.

To ensure that Canadians can get the financial help they need, the federal government has announced new measures to help people who have lost their jobs as a result of the pandemic.

On Wednesday, the Liberal government announced the Canada Emergency Response Benefit (CERB), which will provide income support payments amounting to about $2,000 a month. The new program collapses two previously announced benefits — the Emergency Care Benefit and the Emergency Support Benefit — into one.

A government news release says the “simpler and more accessible” program will cover Canadians who lost their jobs, got sick, are under quarantine or have to stay home because of school closures.

Other elements of the emergency response plan:

  • Canadians who are already receiving employment insurance (EI) regular and sickness benefits as of today will continue to receive benefits and should not apply to the CERB.
  • Canadians who have already applied for EI and whose applications have not yet been processed don’t need to reapply. Canadians who are eligible for regular EI and sickness benefits can still access those benefits if they’re still unemployed after the 16-week period covered by the CERB.

Keeping EI claims workers safe

Eddy Bourque, national president for the Canada Employment and Immigration Union, told CBC News there is already a backlog of claims that need to be processed, and continuing to process them the same way now will take years.

Bourque said some sort of automation will be required to meet the surge in demand without compromising the safety of Canadians who would be required to work together to get the job done.

“They’re going to have to explain to our members what steps they’re taking to make sure it’s feasible to process all of these,” he said. “Our concern is they have to protect the health and safety of those workers doing this work, because without them, none of it will be possible.”

A key part of the plan, according to a government official speaking on condition of anonymity, will be to spend less time confirming whether the claims are all justified and settle on clawing back any fraud after the crisis is over.

Progress not perfection

Mel Cappe, former chairman of the Employment Insurance Commission and deputy minister of Human Resources Development Canada during the 1998 ice storm, said he’s confident the federal government can get the job done, if it goes about it the right way.

At the time, he had to preside over the processing, ramping up the rollout of benefits on a much smaller scale but during a time when the department’s offices had no power.

“If they try to do this perfectly, where nobody who doesn’t deserve it gets the money; they will [mess] it up,” he said. “If they try to get the money out because people need it, they will do a good job, and there’ll be a couple of cheques that go to people who don’t deserve it; who cares.”

Moshe Lander, a senior lecturer in economics from Concordia University, said it’s much better to make the mistake of giving someone money who does not need it than it is to deny money to someone who really is in need.

“If you deny EI to somebody that really did deserve it, when they lose their house, when they lose their apartment, when they’re evicted, when they can’t put food on the table, you can’t go back and say, ‘Oops, let’s undo that,'” Lander told CBC News.

Regardless of how efficiently the federal government is able to meet the surge in EI demands, the whole process will likely be reviewed by the Auditor General of Canada, eventually revealing to Canadians how much was over- or under-spent.

“It’s taxpayer money, and you have to be respectful of that, but you are also going to be judged by results,” said former Conservative cabinet minister Tony Clement, who was the Ontario health minister during the SARS outbreak.

“They really are in a pickle.… There is no right answer. It’s a terrible place to be. But ultimately leaders are going to say: ‘I have to do this for the public, and if there is a corner that has to be cut, let’s cut the corner and worry about the consequences after the fact,'” Clement added.

AM Best affirms “A- (Excellent)” rating for Economical Insurance

WATERLOO, ON, November 15, 2019 — AM Best affirmed today the financial strength rating of A- (Excellent) and issuer credit rating of “a-” for Economical Mutual Insurance Company.  The outlook for these ratings remains stable.

“We are pleased that AM Best has once again affirmed its ratings and stable outlook for Economical, which demonstrates our continued financial strength,” said Philip Mather, executive vice president and chief financial officer of Economical Insurance. “Economical is committed to being a strong, stable and disciplined company as we pursue demutualization and prepare to become a publicly-traded company.”

In its rating announcement, AM Best acknowledged Economical’s strong capitalization and commitment to organizational and operational transformations through investments in its personal lines broker business and development of its digital direct brand Sonnet.

For more information about AM Best’s ratings, visit www.ambest.com This is an external link.

About Economical Insurance

Economical Mutual Insurance Company (“Economical” or “Economical Insurance”, which includes its subsidiaries where the context so requires) is a leading property and casualty insurer in Canada, with approximately $2.5 billion in annualized gross written premiums and $5.9 billion in assets as at September 30, 2019. Economical is a Canadian-owned and operated company that services the insurance needs of more than one million customers across the country.

Expansion will enable property and casualty insurance professionals to enter the digital world

Read more

Surex is the Fastest-Growing Insurance Brokerage Two Years in a Row on the Growth 500

MAGRATH, Alberta — Surex, Canada’s online Insurance Marketplace™, is excited to announce that its revenue growth of over 1000% in 5 years, has landed the company in the top 100 of the Growth 500. Surex was ranked no. 93 by Canadian Business and Maclean’s on the annual Growth 500, the definitive ranking of Canada’s Fastest-Growing Companies. Produced by Canada’s premier business and current affairs media brands, the Growth 500 ranks Canadian businesses on five-year revenue growth. Growth 500 winners are profiled in a special print issue of Canadian Business published with Maclean’s magazine and online at CanadianBusiness.com and Growth500.ca.

Surex made the 2019 Growth 500 list with five-year revenue growth of 1071%.

“The companies on the 2019 Growth 500 are truly remarkable. Demonstrating foresight, innovation and smart management, their stories serve as a primer for how to build a successful entrepreneurial business today,” says Beth Fraser, Growth 500 program manager. “As we celebrate over 30 years of the Canada’s Fastest-Growing Companies program, it’s encouraging to see that entrepreneurship is healthier than ever in this country.”

“We are proud to have been selected to the Growth 500 list for the second time in two years,” said Lance Miller, CEO and Co-Founder of Surex. “We have worked aggressively to build Surex as Canada’s fastest growing online Insurance Marketplace, and to make purchasing insurance as easy and frictionless as possible for Canadians. We are proud to be small-town Canadian entrepreneurs and we will continue to expand the team and the technology that has brought us here.”

“Our vision is to change the way Canadians purchase insurance, and we are not satisfied with incremental change,” said Matt Alson, COO and Co-Founder of Surex. “We are humbled to see the results of our efforts be recognized by one of Canada’s most prestigious entrepreneur programs. Our growth is thanks to our team and our customers who trust us with their business.”

Surex provides auto, home, and business insurance to customers in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Saskatchewan, and in the Northwest Territories and the Yukon.

For more information about Surex, please visit www.surex.com.

About the Growth 500
For over 30 years, the Growth 500 has been Canada’s most respectable and influential ranking of entrepreneurial achievement. Ranking Canada’s Fastest-Growing Companies by five-year revenue growth, the Growth 500 profiles the country’s most successful growing businesses. The Growth 500 is produced by Canadian Business. Winners are profiled in a special Growth 500 print issue of Canadian Business (packaged with the October issue of Maclean’s magazine) and online at Growth500.ca and CanadianBusiness.com. For more information on the ranking, visit Growth500.ca.

About Canadian Business
Founded in 1928, Canadian Business is the longest-serving and most-trusted business publication in the country. It is the country’s premier media brand for executives and senior business leaders. It fuels the success of Canada’s business elite with a focus on the things that matter most: leadership, innovation, business strategy and management tactics. Learn more at CanadianBusiness.com.

Technology Trends in the Insurance Industry

Technology Trends in the Insurance Industry

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Advances in technology will have a major impact on all aspects of the business of insurance worldwide. For example consumers have become more knowledgeable and expect more, opportunities for auto insurance are changing, personal data is being used more extensively than ever before. There is much to consider.

By the end of this course you will be able to:

  • Describe the technology and its impact on the insurance industry
  • Explain planning for technology implementation in the insurance industry
  • Describe the exchange of data between brokerages and insurance companies

Become an ILScorp group member to save even more.

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Access Duration from the Date of Purchase: 6 months
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Accrediting Provinces: BC, AB, SK, MB, ON
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Included as part of the ILScorp Life/A&S CE Subscription.

Access Duration from the Date of Purchase: 6 months
Credit Hours: 2
Credit Type: Life/A&S – Technical
Credit #: AIC #48003; MB#30088
Accrediting Provinces: BC, AB, SK, MB, ON
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Included as part of the ILScorp Chad CE Subscription.

Access Duration from the Date of Purchase: 6 months
Credit Hours: 2
Credit Type: Administration
Credit #: AFC10861
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Credit Type: CSF – Insurance of persons
Credit #: CSF19-02-45665
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