Struggling merchants, insurers battle over pandemic coverage

By Michael Liedtke

THE ASSOCIATED PRESS

Restaurants, bars and other merchants struggling to stay afloat during the coronavirus pandemic are desperately reaching out for a lifeline from insurers that in turn contend they are being miscast as potential saviours.

Shutdowns and crowd restrictions imposed by state and local governments to limit the spread of the virus have resulted in more than $1 trillion in estimated losses so far for thousands of rapidly sinking small businesses.

That has prompted a flood of claims under business interruption insurance policies that have been almost universally rejected for a variety of reasons, including boilerplate provisions inserted by insurers after the SARS outbreak in 2003 to exclude disruptions caused by virus and bacteria.

“This is an existential threat,” said John Houghtaling, a New Orleans attorney who is representing restaurants and other businesses seeking about $8 billion in losses that he estimates they will suffer during the pandemic.  “A lot of people who did the right thing and bought this coverage thinking they would be thrown a lifeboat if disaster struck are now being told, `Sorry, let the Coast Guard come and get you instead.”’

So many lawsuits have been filed against insurers in the U.S. that a Thursday hearing has been scheduled before a federal judicial panel in Washington to decide how to manage them all in the months and possibly years  ahead. The panel’s review involves more than 200 federal complaints in addition the other lawsuits filed in state courts by the owners of meat-and-potato cafes as well as some of the nation’s best-known and most exclusive restaurants, such as the French Laundry in Napa Valley’s wine country and California cuisine pioneer Chez Panisse in Berkeley, California, which sued its insurer, AMCO, for breach of contract earlier this month.

“The servers, cooks, farmers, ranchers and other hard-working people in the Chez Panisse family are seeing their livelihoods in jeopardy because AMCO has declined to live up to its responsibilities,” said Alice Waters, Chez Panisse’s owner.

President Donald Trump weighed in on the thorny issue in April when he told reporters that he suspected many insurers were dodging their obligations.  “You have people that have never asked for business interruption insurance (payments) and they’ve been paying a lot of money for a lot of years for the privilege of having it,” Trump said.  “And then when they finally need it, the insurance company says, `We’re not going to give it.’ We can’t let that happen.”

Although sympathetic to their policyholders’ plights, insurers say most business interruption policies were designed to cover shutdowns caused by catastrophes such as hurricanes and terrorist attacks while excluding pandemics that cause widespread losses too staggering to cover, even for an industry sitting on $850 billion in reserves. Only a small number of businesses sought additional coverage that specifically includes losses caused by pandemics, said David Sampson, CEO of the American Property Casualty Insurance Association, an industry trade group.

Even so, Lloyd’s of London has estimated the insurance industry still will pay out $107 billion in pandemic-related claims, more than the combined amounts doled out after the terrorist attacks in September 2001 and Hurricane Katrina in 2005. Besides businesses that bought special coverage, the claims include payouts to major sporting and entertainment events that bought cancellation policies coverage, such as the Wimbledon tennis tournament that is collecting about $140 million under its pandemic policy. Insurers also are paying workers’ compensation claims for employees who get sick on the job.

“This popular meme out there that the insurance industry isn’t paying for losses is just not true,” Sampson said.

But the claims insurers are paying only a small fraction of the $231 billion to $431 billion in monthly losses piling up at U.S. businesses with fewer than 100 employees, according to the industry’s estimates.

At that rate, insurers would have no money left to cover non-pandemic claims for auto accidents, home fires and even damages to businesses during the protests across the country since George Floyd died at the hands of Minneapolis police in May, according to industry consultant Robert Hartwig of the University of South Carolina’s risk and management centre.

The denial of business interruption coverage is also hurting bars across the country, many of which haven’t been able to offer pick-up or outside dining like restaurants have. The Ivy Club, which also offers live music during normal times its Albany, California, venue, has had to lay off most of its 20-employee staff since March and is now raising money from community donations while it fights its insurer over its business interruption claim.

“Everything is so uncertain that we really don’t know what we are going to do,” said Summer Gerbing, one of the Ivy Room’s co-owners.

Meanwhile, lawmakers in California and several other states have drawn up legislation that would force insurers to cover the business interruption losses that have piled up since March  a requirement that, if imposed, the industry is already vowing to fight as unconstitutional.

The dispute boils down to whether business interruption policies can be applied to instances when there is no physical damage or destruction to a restaurant or store that is being prevented from conducting business as usual.

In one of the first decisions issued on that question earlier this month, a Michigan state judge sided with an insurer’s rejection of a claim for $650,000 for two months of losses that Nick Gavrilides said he suffered at two restaurants, the Soup Spoon Cafe in Lansing, Michigan, and the Bistro in nearby Williamston, Michigan.

Gavrilides’ lawyer, Matthew Heos, contended business interruption coverage should apply because authorities prohibited customers from physically entering the property, an assertion derided as “nonsense” by Judge Joyce Draganchuk during a July 1 hearing posted online.

“There has to be something that physically alters the integrity of the property,” Draganchuk concluded in her dismissal of Gavrilides’ case.

Gavrilides is now serving customers inside both restaurants but only at half capacity, a restriction that is making it difficult to stay open even though they are operating with skeletal staffs. The Soup Spoon Cafe now has 12 to 15 employees, down from 40 just before the pandemic.

“It’s literally day to day for us now,” Gavrilides said. “I feel let down for everybody. I thought by paying my premiums for the past 14 years and it my service was ever interrupted, I would be rescued. But I guess that isn’t going to happen now.”

Mutual of Omaha insurance firm removing longtime Indian logo

OMAHA, Neb. _ Mutual of Omaha plans to replace its longtime corporate logo, which for 70 years has featured a depiction of a Native American chief, the insurance company announced Friday.

The move comes as corporations and sports teams around the country face increasing pressure to dump nicknames and depictions that reference American Indians amid a nationwide movement calling for racial justice.

“We believe the decision to retire our corporate symbol is the right thing to do and is consistent with our values and our desire to help overcome racial bias and stereotypes,” Mutual of Omaha CEO and Chairman James Blackledge said in a news release Friday.

The Omaha, Nebraska-based company is in the process of creating a new logo.

Blackledge said the company also is committing an additional $1 million to the $2 million is donates annually to community-based initiatives to address racial equality and social justice. The company’s management team will also undergo additional training on diversity and inclusion, including unconscious bias training, the company said.

Mutual first adopted its Indian chief head logo in 1950, according to its website. The company has said the chief logo was intended to represent the Plains Indians and their values of strength of character, honesty and care for their members, according to the Omaha World-Herald.

Canada’s film & TV industry should be getting back to business — but no insurers are willing to provide COVID-19 coverage

It must have been music to their ears when the Toronto branch of ACTRA, the union representing Canadian performers, announced to its more than 15,000 members that “Ontario is getting ready to roll!” Anyone looking to make a film or TV production in the province is now free to do so — as long as they don’t do it in Leamington.

For content-starved Canadian viewers, this must be good news as well.

There’s only one problem: there’s currently not a single rated insurer in the world that will provide coverage to film and TV producers without a COVID-19 exclusion.

Unless government steps in, the situation won’t improve anytime soon.

Fortunately, the Canadian Media Producers Association (CMPA) has tabled a proposal that could solve the problem. Specifically, it’s asking the federal government to provide a $100-million backstop for COVID-19-related insurance claims.

The CMPA plan is not a handout. Producers would be required to pay an additional premium for the coverage. However, unlike the policies offered by large global insurance companies, whose COVID-19 exclusions are being driven by the out of control outbreak south of the border, this Made in Canada solution would be designed to address the specific risks of producing in this country.

It would allow the industry to get back to work. If the government decides to act.

Canada’s production industry is a highly fragmented web of small business owners (producers) and independent service providers (writers, directors, actors, composers, crew and others). Most producers have small full-time staffs and hire the bulk of their workers on a project-by-project basis.

This model applies equally well for a cooking show, a dramatic television series, a Telefilm-funded Canadian movie, or one of the many American films that are regularly seen shooting around Toronto, Vancouver and other Canadian locations.

In normal times, all this adds up to big business, supporting more than 180,000 direct jobs and adding an estimated $12.78 billion to the nation’s GDP.

Until there’s a safe and effective vaccine the biggest risk to any production is a COVID-19-related shutdown. That may take the form of a lead performer or director becoming seriously ill or dying, or a government reimposing lockdown in the middle of filming.

The TV networks, lenders and equity financiers who fund productions are not willing to assume that risk and require insurance coverage without any exclusions. Without such insurance, there can be no production.

Allowing this situation to continue is bad policy for several reasons.

Most obviously, a sizable industry that governments across the country have deemed safe to reopen is effectively prevented from doing so. In provinces like Nova Scotia and Newfoundland, which have active production industries and three diagnosed case of COVID-19 between them, the case for returning to work is especially compelling

Since writers, directors, performers, composers and crew are not full-time employees, the Canada Emergency Wage Subsidy provides no relief.

Some in the industry are eligible for the Canada Emergency Response Benefit, which is a direct financial cost to the government and provides a bare subsistence income in the costly urban centres where production talent is most concentrated.

The Star

Insurers warn on forced payouts for uncovered coronavirus losses

The excerpted article was written by Simon JessopAbhinav Ramnarayan

LONDON (Reuters) – World insurers told governments on Monday that making them pay out on losses suffered due to the coronavirus that were not covered by policies risked destabilising the insurance industry.

With the global economy hammered by measures to halt the spread of the virus, companies are struggling to survive on tumbling revenues, prompting many to examine insurance policies for potential claims on disruption to their businesses.

In Britain, lawmakers have pushed insurers to show flexibility and Britain’s Financial Conduct Authority has told insurance companies that the behaviour of customers will change due to lockdown restrictions.

The Global Federation of Insurance Associations (GFIA) said insurers were committed to paying out on policies but said they should not be asked to cover areas where no contract existed.

“Where coverage for pandemics and other causes of loss were not included in existing policies or reflected in premium payments, requiring insurers to cover those losses retroactively could seriously threaten the stability of the global insurance industry,” the GFIA said in a statement.

“Events such as fires, motor vehicle accidents and natural catastrophes covered by insurance do not stop, even during a pandemic.”

Some regulators and supervisors had asked for additional data and information as they seek to manage the fallout from the coronavirus, but the GFIA said more coordination was needed.

“Coordination between governmental authorities – and the allowance of some flexibility to account for existing administrative burdens – will be very important in allowing the industry to concentrate time and resources on serving policyholders and confronting the pandemic,” it said.

Reporting by Simon Jessop, Editing by Edmund Blair

Vegas: Thomas Keller files suit over coronavirus insurance coverage

The excerpted article was written by  

Chef Thomas Keller, who operates Bouchon Bistro and Bouchon Bakery in The Venetian and is planning a new restaurant in Wynn Las Vegas, has filed what could be a groundbreaking lawsuit in a California court, asking for a legally binding decision on whether his business interruption insurance policy allows him to recover business losses suffered in connection with the COVID-19 crisis.

The suit, filed in the Superior Court of California County of Napa, addresses Keller’s policy with Hartford Fire Insurance Company. But the chef’s attorney, John Houghtaling, says there’s an industry-wide issue at stake.

“To avoid payments for a civil authority shutdown, the insurance industry is pushing out deceptive propaganda that the virus does not cause a dangerous condition to property,” Houghtaling said in a statement issued by the Thomas Keller Restaurant Group. “This is a lie, it’s untrue factually and legally. The insurance industry is pushing this out to governments and to their agents to deceive policyholders about the coverage they owe.”

Locally, Carson Kitchen’s owner and President Cory Harwell says he hopes Keller’s actions will set a precedent that will aid smaller businesses like his own.

“Without the Thomas Kellers of the world, without somebody blazing that trail for us, the little guy like me can’t really do anything. We’re stuck with whatever the insurance company says. Because we can’t expend our very precious resources that we do have on fighting a fight like this, when those funds are earmarked to try to stay alive, to keep our employees employed, and to keep our businesses afloat.”

Harwell has filed a claim with his insurance company on behalf of his restaurants in Las Vegas and Atlanta, under the terms of his business interruption coverage. He’s fearful, however, of how it will be received.

“Almost all (policies) have an exclusion in them for viruses and bacteria. So their stance on this is that this is an excluded event. And I know that that’s probably what’s coming back to us.”

He doesn’t believe that such a response would be appropriate in the current situation.

“A virus didn’t close my restaurant, the government did,” he explains. “And the government closing my restaurant is a protected event.”

At JRS Hospitality, which has temporarily stopped its operations at Alexxa’s, Beer Park, Cabo Wabo Cantina, Chayo Mexican Kitchen, Hexx Kitchen and Bar and Chateau Nightclub on the Strip, managing partners Corey Jenkins and Matt Silverman are having their attorneys prepare the business interruption insurance claims.

“We have not had a claim rejected,” Silverman explains. “But based on what we’re seeing in the news, we’re preparing for that possibility. That’s why we’re having legal do this for us the correct way, so that we have the best shot.”

“It seems obvious to us,” Jenkins says. “We were prevented from entering the premises and operating our business. That is a business disturbance. And that is exactly what business interruption insurance is for.”

 

Will Technology Replace Insurance Agents?

The excerpted article was written by Lev Barinskiy | Forbes

Chatbots, artificial intelligence (AI) and machine learning — technology is changing the landscape of the insurance industry. There’s a new facial recognition software, created by Lapetus Solutions Inc., that analyzes how well a candidate for life insurance will age. Facial recognition technology already promises to prevent fraud and crime at ATMs and self-checkout counters. Emotion recognition technology holds the promise of preventing insurance fraud by building upon facial recognition. It could help agents recognize a person’s emotional state based on voice signals and word usage. These tools may help agents and carriers measure risk while better serving consumers but are also creating some anxiety about whether robots will soon replace insurance agents.

Some of us in the insurance business remember the days when carriers relied on an agent’s gut feeling when it came time to determine risk based on personal knowledge or predictions. Many things have changed since then. Not only do carriers have far more precise, sophisticated predictive models, but in my experience, they also no longer allow agents to deviate from set pricing.

While there isn’t much insurers can do about technology pushing price as the bottom line, they can and are using some tools to their advantage. For instance, 2017 McKinsey research suggested that automation could reduce the cost of a claims journey by as much as 30%. Technology can also prevent challenges like cybersecurity threats through accurate predictions. Chatbots are assisting customers on a 24/7 basis at many businesses, which could increase customer retention. But this all leads to the question: How can an agent compete with the new technology? Can the two co-exist in the future?

According to U.K.-based firm Autonomous Research, AI and machine learning could replace over $1 trillion of the current financial services cost structure. And let’s be clear: The savings would likely largely be attributed to displaced jobs. Why shouldn’t insurance agents worry, then, with predictions that around 2.5 million financial jobs will be gone by the year 2033?

In the heyday of the neighborhood brick-and-mortar insurance shop, agents were the face and brand of an insurance company. While agents continue to interact with clients via phone, in person and over the internet, carriers are experimenting with technology to increase direct interaction with clients. Insurance carriers are already getting insurance leads from insurtech companies like mine, Compare (a SmartFinancial.com client) and The Zebra. Many businesses are also using technology to enhance the quality of insurance jobs. In fact, according to Deloitte’s 2017 white paper, the insurance industry is lagging behind compared with banking and financial services in its adoption of automation. Only recently have I seen insurers looking to explore the benefits of robotics and AI. However, that does not mean that agents will not still be needed. Robotics and AI, more than anything, could automate transactions and processes like claims processing and document verification. (Lemonade, a SmartFinancial.com client, and Hippo are already incorporating automation.) Consumers could see more options for self-service, and over time, I believe this will create less of a need for back-office jobs. On the flip side, there will be a greater demand for agents with skills in data analytics and machine learning.

READ MORE HERE AT FORBES

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