Move Insurance Matters Forward: Experienced Neutrals Can Assist Insurers and Policyholders in Resolving Coronavirus-Related Insurance Claim Issues
Many businesses across the globe are at a standstill. With mounting financial obligations and no immediate end in sight, they will be looking for a mechanism for survival. This is not business as usual, so the solutions available should reflect that. Of course, legal advice about the coronavirus pandemic can be found everywhere: in emails, webinars, client alerts, legal publications and Zoom videoconference calls.
Almost all practice areas are implicated, from labor and employment to health care to real estate. Insurance is very prominently discussed in communications from both insurer and policyholder law firms and their lawyers, which include the following topics:
- Do event cancellation policies cover losses from postponement or cancellation of events?
- Does your commercial general liability policy cover claims from your customers who contend that they contracted the virus when they visited your facility?
- Do your employment practices liability policies cover coronavirus-related claims from your employees?
- What about layoff, discrimination, wage and hour, workers’ compensation or employers’ liability claims?
- Are your D&O liability insurance or errors and omissions liability insurance policies implicated because of coronavirus claims against your company, your senior management or your board of directors?
- Does your property policy cover alleged damage to your property because of the presence of the coronavirus?
- Does your property policy cover business interruptions due to quarantine, shelter-in-place and safer-at-home orders?
Predictably, policyholders will soon be making claims under all these policies, and the insurers will begin their investigations. The insurers will ask for information as part of their initial investigations, and the policyholders, in most instances, will provide some of it. The insurers will have questions about the limited information provided. This is where many policyholders will resist the extent of further requests. Finally, the power struggle will begin, and accusations will be made by both sides. The policyholders will claim bad faith and unfair claims practices, and the insurers will claim failure to cooperate. Both sides will threaten litigation or arbitration, depending on the dispute resolution provisions in the applicable policies, and the battle lines will be drawn.
Meanwhile, the clients will be frustrated. The insureds, especially those whose businesses have been shut down or materially disrupted, will want their claims paid promptly. The insurers will advise that they want to pay covered claims promptly, but that there is an “information deficit.” The insurers may further advise that, once that deficit is eliminated, they can quickly determine whether and how much of each claim is covered. For example, under a property policy, the policyholder usually must provide the insurer with a detailed proof of claim to support its business interruption losses. However, the insurer may respond that because the policyholder’s proof is not sufficiently detailed, it needs more supporting documents and may request interviews of knowledgeable employees of the insureds or third parties. The policyholders may push back about the need for this additional information.
An experienced insurance neutral can assist both policyholders and insurers to resolve coronavirus-related claims. The neutral can also manage some of the conflicts that will emerge regarding those aforementioned information deficits.
The neutral can introduce a process to assist both sides in narrowing the information gap and reducing the time it takes for the insurer and the policyholder to reach an agreement. He or she can help each side understand the underlying reason for the information deficit, promote a collaborative fact-finding process, assist the insurer in obtaining the tools to verify the policyholder’s claims, informally supervise each side’s consultants and experts, and guide the insurer and the policyholder toward an appropriate resolution.
Peter Rosen is a neutral at JAMS. He handles high-profile insurance matters covering a wide range of commercial issues and policies, including directors and officers (D&O) liability, general liability, property, cyber, employment, professional liability, construction, fidelity, environmental, representations and warranties insurance, and reinsurance. He can be reached at firstname.lastname@example.org.
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