Insurance policies containing provisions for business interruption will almost certainly not cover losses as a result of the coronavirus pandemic, industry leaders insist.
Missouri businesses, many of them immediately struggling following the forced shut down in the face of the spread of the virus, are looking at different ways to survive during this unprecedented period.
And there is expected to be litigation, potentially a surge, where businesses argue they should be covered under the policy provision..
Brandon Koch
Further, some lawmakers, though not Missouri, yet, are considering introducing legislation that would allow businesses to claim for interruption and force insurance companies to pay out, a move that the industry claims would have a "catastrophic effect." State regulators are warning against federal moves to retroactively make insurance companies liable.
Gov. Mike Parson has issued a stay-at-home order, which started 12:01 a.m. Monday and runs until Friday April 24.
All residents have been told to not spend spend time outside except for "essential activities." Retail locations must limit the number of individuals inside the outlet at any one time. The order does not prohibit people from accessing grocery stores, gas stations and banks, or engaging in outdoor recreation.
As of late Sunday, Missouri had a reported 2,367 confirmed cases and 49 deaths.
"We are starting to hear more and more talk about business interruption claims as this pandemic progresses," said Brandon Koch of the Missouri Insurance Coalition.
"We are trying to educate people on business interruption, what it is and what it is not. For example, with fire damage where you are not able to open your business, and sell your products or services."
Koch added: "If a business is not able to bring their goods to market due to a particular event, then the business interruption will apply. But it needs to be physical injury or damage to property for that coverage to kick in."
But most policies do have exceptions and will not cover pandemics or, for another example, wars, the coalition said.
The insurance industry's position is that the federal government's more than $2 trillion relief package provides the support to businesses in what is an entirely unprecedented situation.
There is a process where companies can apply for relief for the business to cover payroll, rent, utilities and other outgoings, The package is aimed at bridging the gap to allow companies remain viable, Koch said.
The industry is warning that some lawmakers in some states are contemplating introducing legislation stating, regardless of the wording of the policy, that insurance companies should be liable to pay out claims linked to the interruption of a business.
"That would would have a catastrophic effect on the insurance industry," Koch said, adding that otherwise he does expect lawsuits to be filed, but that does not mean they have merit.
Brent Butler, the coalition's government affairs director, added: "There probably will be some lawsuits but the contracts are very clear - there is an exclusion in the policy."
He added that the whole rationale behind insurance is that the cost is spread across many if one is damaged and it would be impossible to underwrite a policy for a pandemic, which could simply not be priced. Most policies do have specific language related to pandemics and wars.
The National Association of Insurance Commissioners (NAIC), which represents state regulations, explained that business interruption insurance coverage "protects against losses sustained due to periods of suspended operations; it pays loss of revenue that would have been earned if there was no business interruption."
"It typically requires physical loss to property and may have specific exclusions for viral infections such as COVID-19," the association told the St. Louis Record in a statement.
"Contingent business interruption insurance policies protect against losses from supply chain disruptions, but may require property damage," it added. "Typically, policies exclude coverage for communicable diseases, such as COVID-19.
"Not all businesses carry a stand-alone business interruption policy. However, policies that package liability coverage and property coverage into one policy will typically provide some coverage for business interruption.
"Most business property insurance policies either insure specific named perils, losses from specifically identified causes, or provide coverage with specific named perils excluded. In addition to a covered peril, these policies will also require that the business interruption be the result of a direct physical loss.
"It is important that policyholders read the policy carefully to determine the initial scope of coverage that the policy provides for business interruption and associated extra expenses, as well as any exclusions or conditions that would limit the coverage."
The NAIC welcomed moves made in Washington by Congress and the Trump administration, which the organization said that it gives "states greater flexibility to protect consumers and deal with ever-changing market dynamics.
However, the association added, "as Congress considers further legislative proposals to address the devastating impacts of the COVID-19 pandemic, we would caution against and oppose proposals that would require insurers to retroactively pay unfunded COVID-19 business interruption claims that insurance policies do not currently cover."