Property, casualty policies may be exposed to virus claims: Experts

Property and casualty policies may be exposed to claims due to losses stemming from the coronavirus outbreak, experts said in a webinar Tuesday.

Chris Cheatham, CEO of RiskGenius and based in Overland Park, Missouri, said that public policy may also play a role in how claims play out.

“Don’t just focus on property policies; your casualty policies matter, too,” Mr. Cheatham said.

“We’re seeing restaurants and businesses not shutting down,” Mr. Cheatham said. “That is fodder for lawsuits,” he said, from those claiming they were exposed or infected due to such decisions.

Directors and officers coverage and resulting defense costs may be triggered by shareholder lawsuits, such as against a cruise line, said Cheri Trites Versluis, director, policy analysis for RiskGenius.

She said RiskGenius knows of two suits alleging “corporations engaged in wrongful conduct leading to a decline in stock price.”

Property policies with exclusions for communicable diseases or viruses and bacteria will likely not be triggered by coronavirus claims, Ms. Trites Versluis said. She said she anticipates these exclusions, drafted in response to previous epidemics and pandemics, to be “pretty well upheld,” and that any policies containing such exclusions will “very likely” not be triggered by a coronavirus claim.

The key question among other property policies without such exclusions will likely be whether physical damage or loss was sustained, Ms. Trites Versluis said.

She said many of the analyses of the physical damage question have cited Gregory Packing Inc. v. Travelers Property Casualty Co. of America, in which a U.S. district court in New Jersey in 2014 found that covered property damage had occurred when ammonia was accidentally released into a facility, rendering the building unsafe until it could be aired out and cleaned.

She noted, however, that “other cases in other jurisdictions have reached contrary conclusions as to whether contamination constitutes physical loss.”

Mr. Cheatham said that public policy may well play a role in the disposition of these issues in the courts, noting that some public officials have taken the position that “the virus is physically causing property damage due to its proclivity to attach to surfaces for a prolonged period of time.”

He said public officials appear to be trying “to set up insurance claims.”

More insurance and risk management news on the coronavirus crisis here.