Democrats brace for the cold shoulder from Donald Trump’s administration.
Did insurers need to see how bad it could get before agreeing to pay for pain relief alternatives?
By Danielle Gilmore and Linda J. Brewer
Movie theaters, gyms, hotels and golf courses have been forced to close temporarily. Long-standing sporting events, such as the NCAA basketball tournament, the Masters golf tournament, the Kentucky Derby and the Olympics, have been canceled or significantly postponed. Broadway has gone dark, theme parks such as Disney World have shuttered, and musical performers have called off their tours. The economic implications of such closures and cancellations is likely to be staggering. It is thus anticipated that an increasing number of businesses will look to their insurance policies to mitigate their losses.
Some policyholders may have purchased a specialized insurance policy that could provide coverage for the damages resulting from the necessary cancellation or curtailment of an event. Event cancellation policies generally do not require a specific type of event to trigger a covered loss, provided that the claimed loss is beyond the policyholder’s control. If a covered loss occurs, these policies generally indemnify the policyholder for any expenses incurred, as well as any lost revenues caused by the necessary cancellation, although this is not always the case. In the context of the COVID-19 pandemic, it is important to note that many existing policies specifically exclude losses caused by pandemics or government-ordered quarantines.
COVID-19 caused the cancellation: When evaluating event cancellation claims related to COVID-19, there are several factors that might affect the existence of coverage or the amount of damages. For a cancellation or postponement of an event to constitute a covered event, policies generally require that the policyholder show that it is unable to commence or keep open the event. For events that were scheduled to begin in early 2020, this may require an investigation as to whether the cancellation or delay was required by COVID-19, was an opportunistic decision or was caused by another event that may be excluded under the policy. For canceled events that were scheduled to take place later in the year, the policyholder may have to show that it was unfeasible to make alternative arrangements for the event.
Pandemic- or quarantine-caused losses: Another factor to consider is whether there are any policy exclusions applicable to a COVID-19 claim. For example, many event cancellation policies specifically exclude losses caused by pandemics or quarantines. However, some insurers offer endorsements that will provide coverage in the case of a pandemic. As is always the case with insurance, the specific wording of the policy must be scrutinized.
Event cancellation policies generally also exclude pre-existing circumstances, which may preclude coverage under policies issued in 2020 — after the outbreak was first reported in Wuhan, China — even if COVID-19 is not identified as a specifically excluded risk. Additionally, the policy may contain an exclusion for pollution or contamination, which may apply to COVID-19 based on the policy wording.
Damages: Calculating the amount of covered damages from a canceled or curtailed event is likely to present difficult questions and may require detailed investigation. Event cancellation policies generally require that any covered damage be caused directly by the cancellation or curtailment, requiring a fact-specific determination if claimed damages are too remote to be covered. In addition, depending on the policy language, lost profits may or may not be covered. If lost profits are covered, calculating those profits may require production of documentation by the policyholder, and possibly the retention of an expert to assist in the adjustment.
Business interruption insurance compensates a business for its lost profits and certain expenses when operations are affected by physical damage to insured property caused by a covered peril that prevents normal operations. These policies may also provide coverage for lost profits or extra expenses resulting from an interruption of business at the premises of a customer or supplier. The coverage can be purchased as a standalone product or as part of a comprehensive property policy. These policies contain specific limitations to the scope of coverage that will be relevant to the current pandemic. Insurers and policyholders should therefore carefully consider the policy terms for COVID-19-related losses under such policies.
Virus exclusion: Business interruption policyholders will first need to consider whether the policy contains an exclusion that applies to losses related to a virus or illness. The virus exclusion, which originates from a form published by the Insurance Services Offices Inc. and is part of its standard property policy, excludes coverage for any “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” The exclusion explicitly applies to “forms or endorsements that cover business income, extra expense or action of civil authority.” Other policies may include “virus” within the definition of “pollution or contamination,” which is also subject to exclusion. Even if such exclusions are present, there may be avenues to coverage so the language of any exclusion must be scrutinized closely.
Damage to property: In policies in which the virus exclusion is not present or found not to apply, other terms in the policy will have to be considered. For example, business interruption policies typically only cover losses caused by, or occurring in connection with, “physical loss or damage” to the insured’s property.” However, the question of whether the presence of a harmful substance, like the coronavirus, constitutes loss of or damage or destruction to a property is highly fact-dependent. Courts have found for example that the presence of mold does not constitute physical damage. But, they have also found that vapors, odors, or fumes do constitute physical loss or damage.
Quarantine-caused losses: Another important additional consideration is whether the business interruption policy will extend to losses associated with government-enforced quarantines or travel restrictions. While many business interruption policies do include coverage for certain losses caused by the actions of civil authorities, policyholders often will need to establish physical loss or damage to nearby property caused by a covered peril. Policies also generally require that the business disruption be the result of a specific order by authorities that prohibit access to the insured property. Therefore, many policies may not cover situations where a business is interrupted or severely impacted by government directives that do not amount to an outright prohibition on operations. As such, whether a business interruption policy covers losses will depend heavily not only on the scope and terms of the policy, but also on the terms of the relevant order issued by the government authority.
Extent of covered losses: Business interruption policies can also differ with regard to the language used to describe the extent and scope of covered losses. Although business interruption insurance is generally regarded as a means of replacing lost income, business interruption claims often arise in situations in which the economic impact can stretch well beyond the policyholder’s own business. To address this, courts have taken two approaches: 1) an “economy ignored” approach, which looks backward and measures the policyholder’s loss only against pre-catastrophe business levels but does not take into consideration the impact of actual post-catastrophe conditions on the economy, market or demand; and 2) an “economy considered” approach, which seeks to place the policyholder in the position that it would have occupied in the actual post-catastrophe environment had it been able to continue its operations. On this issue, the determination of which approach a court will use most often depends on the language of the policy, as opposed to the forum interpreting the policy.
More insurance and risk management news on the coronavirus crisis here.
By Ian M. Zeller
Does biomedical engineering have a potential role in the insurance industry when it comes to gauging the cause of injuries?
Current trends point to yes.
This application of engineering principles to problems in medicine and biology has a long-evolving history that has come into the spotlight in the past 15 years with its progress in bio-fabrication of artificial organs and surgical robotics and can be particularly valuable for use in the evaluation of bodily injury claims in such industry segments as workers compensation, where injury causation can come into question.
There are several facets to what is collectively referred to as biomedical engineering, including that which explores the understanding and applications of electrical signals in the body, that which seeks to understand and apply the healing and growth properties of human tissue, and that which explores the actions and reactions of the human body, especially as pertains to forces and movements that can lead to injuries.
Despite this inherent value in such industries as workers compensation, involving the concepts of math and physics coupled with the novelty of the field of injury biomechanics for the analysis of personal injuries makes such analysis an often-overlooked part of the claims process. Encompassing a broad field that includes sports science, human performance engineering and medical device design, the most relevant aspect of this discipline to claims evaluation is injury biomechanics.
This is a sub-discipline centered on understanding the relationship between the forces and movements acting upon the body as a result of an incident and the consistency of injuries that would be expected to result from such an event. It is important to distinguish that this is different from the role of a physician whose purpose is to diagnose and treat reported injuries. As such, the physician would treat the injuries regardless of their origin. To highlight this difference, it can be said that a physician uses a “top down” approach where an injury diagnosis is determined on the basis of observations from an examination as well as the history as reported by the patient. This is contrasted by a biomechanics approach that can be described as “bottom up,” basing injury potential on the event itself.
Biomechanics is based on the evaluation of the dynamics from an incident, identification of associated injury mechanisms, and a determination whether the forces and motions from the incident would facilitate the mechanical failure of tissue diagnosed by a physician as an injury. Between these two processes, the biomechanics technique is uniquely qualified as a means of evaluating the link between an incident and a claimed injury as it quantifies the mechanics of the incident.
The scope of a biomechanical analysis is not to dispute a diagnosis, as that is within the purview of a physician, but rather to identify which rendered diagnoses are related to an incident and which are not consistent with the forces and motions associated with an incident. In other words, the analysis attached to biomechanics serves as an evaluation as to whether a particular diagnosed injury is consistent with the mechanics that would have been in effect given the physics of the accident.
The scientific methodology of a biomechanical injury consistency analysis revolves around several basic steps, which include quantifying the forces and movements associated with a particular incident and establishing the known injury mechanisms associated with a claimed injury.
This analysis can include a calculation of the speed change and associated forces involved in a vehicle accident, the motions resulting from a trip and fall, and the forces resulting from contact with a falling object.
The methodology of examining biomechanics is particularly suitable for identifying injuries that resulted from a particular set of traumatic circumstances in addition to identifying which are more likely the result of degenerative processes or predated an incident.
In many cases, injury mechanisms have been extensively published in the peer-reviewed scientific literature and made available in textbooks for teaching purposes. It is understood that some injuries have significantly more complex mechanisms requiring an analysis of multiple forces, moments and possibly abnormal body positioning.
One of the final steps in biomechanical analysis is determining whether each known injury mechanism of the reported injury was consistent with the dynamics of an incident.
While biomechanics generally focuses on the consistency of injuries, it is also possible to use a well-documented injury as evidence to validate the claimed incident as reported. For injury reconstruction, this strategy can sometimes be used to determine the order of events and determine body positioning and orientation prior to an incident.
The role of biomechanics in claims evaluations is sometimes not well understood, and for that reason this type of analysis is often underutilized in claims evaluations. The overall goal of a biomechanical analysis is to evaluate the evidence from an incident, determine the associated forces and movements from that particular event, evaluate the motions, orientations and mechanisms associated with the claimed injuries, and finally compare those claimed injuries with the mechanisms that dictate how they occur. The end result is an evaluation as to whether an injury is consistent with a particular event based on the evidence available.
Specifically, biomechanics is not about making diagnoses; rather it is about determining the root cause that led to the diagnoses given by physicians in the context of a mechanical event.
By Luoise Esola
I was several months postpartum with my first child when I took on my first freelance writing assignment for Business Insurance magazine in 2007, after leaving my post as a staff writer to change diapers — “maternity left,” I called it.
It was to write profiles for a relatively new feature called Women to Watch: interview women in the insurance and risk management industries who are up and coming, who are already there, who were chosen by an editorial panel. Ask them: How do you do it? How will you continue?
To me, it was just an assignment — the editor had promised he would send me freelance work after I resigned to be home. But really, as I later learned, it wasn’t just any assignment.
I had been on staff at Business Insurance for almost a year, and a full-time journalist for six years, when I decided to be a stay-at-home mom. That was, as most people in insurance can relate, not the plan.
My husband and I had been living in Chicago, our first not-so-wonderful winter under our belt, when it occurred to us that his traveling sales position, my long commute via crowded and often late “El train” from the north side to the Loop, the lack of childcare for infants — the cost for a nanny would have nearly eclipsed my young journalist’s salary — and a strong desire to simply stay home with my baby made the choice to stay home with our son easy.
I felt fortunate for that opportunity. However, having worked since I was 14 and aching to do something with my time that made my hard-won journalist career worth it, I still wanted my career. I was delighted when I received that first work-fromhome assignment. A deadline! It felt like old times.
I went on to have another baby within the next year, and I continued to stay home and freelance for Business Insurance for nine years. In the years that followed I contributed pieces for Women to Watch at a time when learning that women can and will do whatever they set their minds to was the message I needed to hear.
I find us moving in a world where we can do what we want, what we set our hearts and minds to — because of these trailblazers. In 2016, I went back to work as a full-time writer. Two months ago, nervous but excited, I took on my first management role: assistant editor.
Who inspires me? Women. Women like the ones you will read about in this month’s issue. Women like the ones I have interviewed since 2007: the thought leaders; the dynamic ones; the problem-solvers; the roll-up- your-sleeves women.
These women work, and many raised or are raising children. Or they travel the world because they can. Maybe they do both. They create companies. Grow companies. Make the numbers work. They are vital, as their companies say.
They moved up the ladder and helped other women. They helped me at a time I needed to hear their messages. They spoke of balancing life, work, love and purpose. They spoke of how you wind up somewhere and you just make do. You continue to strive. You move forward. You move up. As one of them told me this year, you climb that mountain.
By Claire Wilkinson
As the March issue of Business Insurance goes to press, the coronavirus outbreak continues to spread to new countries, with growing numbers sick from the virus and a global death toll that is also rising. While the majority of the cases are in China, where the virus originated, countries including South Korea, Japan, Italy, Singapore, Iran, the United Kingdom and the United States have reported confirmed cases, and varying internal responses are in place from quarantines to travel restrictions and lockdowns.
The broadening economic impact of the virus has affected airlines, cruise lines, manufacturing plants, retailers, hospitality chains, event organizers and transportation companies, among others.
U.S. businesses including Procter & Gamble Co., Apple Inc., Coca-Cola Co. and Starbucks Corp. have all warned of profit declines due to the fallout from the virus. For example, recent comments from Jon Moeller, vice chairman, chief operating officer and chief financial officer of Procter & Gamble, at a Feb. 20 conference in New York highlighted the extent of the supply chain risk and exposures that multinational companies face.
“We access 387 suppliers in China that ship to us globally more than 9,000 different materials, impacting approximately 17,600 different finished product items. Each of these suppliers faces their own challenges in resuming operations. The operating challenges change with the hour, and of course the path of the virus is unknown, making it very difficult to provide precise estimates of impact,” Mr. Moeller said.
Procter & Gamble’s results for the January to March quarter in China and for the total company “will be materially impacted on both the top and bottom line by these dynamics,” he said.
Apple also warned in February that its worldwide iPhone supply will be “temporarily constrained” as its manufacturing partner sites in China are ramping up “more slowly” than anticipated. “These iPhone supply shortages will temporarily affect revenues worldwide,” the company said.
As we continue to cover the story, the word from insurance brokers and others is that most supply chain-related losses for U.S. companies will likely not be covered by business interruption or contingent business interruption policies, because in general both require physical damage for coverage to be triggered.
However, there are nuances in coverage, so for example civil authority provisions in insurance policies may provide coverage for a business interruption loss if a government entity denies access to a covered property.
Coverage under contingent business interruption policies may also be in play, though that would depend on individual policy language, according to industry experts. Policyholders should be checking their policies and providing notice to insurers if they think they have a valid claim, they said.
Perhaps one of the most obvious early takeaways for risk managers and their companies is the importance of having a backup plan and the ability to be nimble during an event. Given all the variables and unknowns surrounding this virus, that is easier said than done, but in the case of companies with a concentration of manufacturing plants and/or suppliers in one part of the world, there’s clearly a problem.
Business practices and supply chains are not going to change overnight and global production systems have so many advantages that this is clearly a risk that needs to be mitigated and where possible transferred rather than avoided.
When states started lifting COVID-19 lockdown restrictions last month, people who had been working from home through the crisis began preparing to head back to their workplaces, in many cases rather reluctantly.
For some, the chance to once again see and chat with co-workers face-to-face is a welcome return to normality, but for others — and for their employers — the mass telecommuting experiment that the coronavirus instigated proved to be a pleasant surprise.
Studies are already coming out showing that a significant number of workers want to continue working from home after the coronavirus pandemic ends. The headline reasons are obvious: no commute, fewer meetings, more flexible work hours and the comforts of home, not to mention seriously relaxed dress codes.
In addition, companies, according to some surveys, are finding that working from home also leads to improved productivity. Contented workers with fewer distractions operating in timeframes that work best for themselves are getting more done in a shorter time, notwithstanding the additional challenges that parents of school-age children have had to bear amid forced home-schooling.
While there are obstacles to overcome — it’s easier to mentor people in person, for example — in many cases they are not insurmountable.
Technology has played a large part in the success of work-from-home strategies. Videoconferencing, messaging apps, performance tracking software and other devices made the shift largely painless for many organizations. While necessity is the proverbial mother of invention, in this case it was more of a nurturer as most of the technology used had been widely available for some time.
Maybe it was a fear of testing the unknown or inertia or a combination of the two that prevented companies from taking advantage of all the telecommuting tools at hand previously, but we’ve clearly reached a new stage in the evolution of work.
For employers, especially those that are being hit hard by the recession, the long-term cost savings that telecommuting brings can be huge. Offloading expensive real estate costs could easily make the difference between profit and loss, and adding flexibility of work location means companies can vastly expand their pool of potential employees.
For risk managers, though, there will of course be insurance and safety implications.
Cyber risk for example will be heightened with telecommuters. Not only are employees more dependent on technology than ever before, it is harder to protect systems and people from hackers when devices are so widely dispersed.
In addition, it’s more difficult to ensure that workers use ergonomically sound workstations rather than hunch over a laptop in a coffee shop.
And despite bring-your-pet-to-work days, you are much more likely to be injured tripping over the dog at home than in the office.
Regardless, increased telecommuting will likely outlive the coronavirus and we all need to adapt.
By Claire Wilkinson
How to plug the talent gap in any industry is a perennial question, but the question asked of this year’s Break Out Award winners “What should the industry do to attract more young people to work in it?” is perhaps more pertinent.
The good news is that this year’s winners, the youngest of whom is in his 20s, universally expressed a commitment to and a belief in the opportunities available to those who pursue a career in insurance. Clearly, rewarding roles and challenging paths are drawing some young people into the industry and retaining their interest as they advance through
That said, there is more work to be done. Many shared that active recruitment for entry level roles needs to start well before graduation day. College campuses are not the only fertile ground where the industry needs to search for new talent. Insurance could be worked into the high school curriculum, one winner suggested.
Social media platforms continue to be important venues for making connections and shaping the industry’s narrative. This is important because many winners feel that the industry is misunderstood and that it needs a public relations makeover. It’s also important because my 10-year-old is looking to YouTube and TikTok to keep a pulse on the latest trends and influencers. As one winner said, “You’ve got to meet young people where they are.”
Another common theme is that in addition to doing a better job of marketing itself, the industry needs to broaden the way most people think about risk management and insurance. As many winners point out, it’s important to get across that it’s not just about home and auto insurance, but also about solving some of the greatest risks facing the world, such as climate change, pandemics and earthquakes, with innovative approaches.
Again, this is borne out by my 10-year-old, who, when asked what comes to mind when he thinks of insurance, responded: “Car insurance, because I see a bunch of ads for that on TV.”
Along with embracing technology, the industry needs to embrace diversity of talent and background, regardless of age and length of time in the industry. One of the challenges facing many companies is how to maintain institutional and industry knowledge, while also providing opportunities for newer entrants to advance, several winners commented.
If there’s one thing this pandemic has highlighted it’s that flexible work schedules, work-from-home options and virtual networking are no longer perks, but things that are here to stay. Already, many companies in the sector are saying the way they work will not be going back to pre-pandemic “normal.” Flexibility and adaptability will attract a new generation, one that has grown up with technology and social tools and expects alternative work options.
Perhaps the most important takeaway on this topic from Business Insurance’s Break Out Award winners is that many young people want to join an industry that is focused more on improving society and benefiting a cause than making a profit. Yes, the industry is about putting peoples’ lives back together, but this goes further.
One winner summed it up by saying: “Young people are attracted to industries where they can really leave their footprint and help drive change. If we can highlight that the insurance industry is an area where they can really make an impact and a difference, that will bring them in.”
Even with the distance of 18 years, the Sept. 11, 2001, terrorist attacks still have a profound effect on the insurance and risk management sectors.
First and foremost, many people in the industry had friends and colleagues who were trapped in the Twin Towers on 9/11 and did not make it out. The hundreds of insurance industry professionals that died in the attacks remain fixed in many people’s memories and continue to be memorialized by their companies.
While obviously less consequential compared with the human loss, the financial ramifications of 9/11 also are still with us.
The attacks starkly exposed a weakness in insurance for companies exposed to terrorist threats. While the industry — after some court fights — paid more than $30 billion in claims from the attacks, insurers were leery of continuing to offer coverage for a peril that was tough, if not impossible, to underwrite with any degree of certainty. Lack of historical loss data, concentration of exposures and difficulty in spreading the risk make provision of terrorism insurance a conundrum.
As a result, the economic repercussions threatened to multiply as lenders said they would not grant loans on properties without terrorism coverage, among other things.
But in the year after the attacks, the industry worked with lawmakers to draft an innovative solution that provided a backstop to the insurance industry: the Terrorism Risk Insurance Act of 2002, which allowed insurers to dispense with terrorism exclusions and offer affordable coverage to businesses.
At its reauthorizations, the backstop was scaled back in various ways, such as with higher deductibles and changes to the recoupment charge on premiums in the event of an attack. But TRIA remains an effective support mechanism for insurers and commercial policyholders at no cost to the federal government.
After the delayed reauthorization in 2015, which helped highlight what the significant role TRIA plays, the program is again up for renewal at the end of next year.
The industry and interested lawmakers already are working to extend the program and have made solid progress. A bill has been introduced in the U.S. House of Representatives that would keep the existing provisions intact and look at ways to update the coverage. While it is unclear how quickly the legislation would progress in the Senate, the industry is off to a good start.
Any legislation that provides financial benefits to companies — real or potential — is always likely be subject to charges of corporate welfare, but lawmakers should not seek to pare back any more coverage from TRIA. If another major terrorism attack occurs in the United States, the last thing anyone needs to be worrying about is its effect on insurance.
While there are plenty of distractions in Washington, lawmakers should not shift their focus away from a key economic buttress for a vital sector.