How will insurance companies handle COVID?
COVID-19 pandemic and how insurance carriers address the coverage issues
The past year has been one for the books along almost every aspect of life as we know it. The insurance industry is no exception to those changes, as we will be walking through the aftermath of the COVID-19 pandemic for some time regarding litigation and how insurance carriers address the coverage issues realized during 2020. We sincerely hope that 2021 brings clarity and resolution in creating regulation and oversight as needed for policy holders and providers. As we move through the next year, we can be certain that many questions surrounding coverage for a pandemic will be put to the test in the courts. We have compiled a short list of concerns to be aware of in the coming days.
“The best way to get a bad law repealed is to enforce it strictly.” ~Abraham Lincoln
Many policy provisions have no virus exclusion
There are currently 1,295 active cases in the courts related to COVID coverage issues, according to U Penn’s COVID-19 Coverage Litigation Tracker in December, 2020 (www.cclt.law.upenn.edu, 12-21-2020). Most active property cases involve Business Interruption, Extra Expense, and Civil Authority.
Until 2020, insurers did not recognize broad and overwhelming policy language that has resulted in confusion from all perspectives as to how and when the policy coverage should apply according to the insurance contract. Many policy provisions either have no virus exclusion, virus exclusions that did not include a causation provision, or no code specific to virus coverage. Policy holders are, understandably, concerned and frustrated with the semantics of policy language, but roughly two-thirds of the suits are not claiming bad-faith damages. This confusion will likely lead to accelerated numbers of cases in the courts and will ultimately be a catalyst for making changes to policy language and coverage in the contract. There is even some conjecture as to whether the courts might allow for coverage regardless of policy language. This would effectively change the legitimacy of how binding insurance contracts might be in the face of worldwide catastrophic losses.
These fundamental questions about insurance contracts certainly bears watching.
Federal Safe to Work Act would offer employer liability relief
COVID-19 coverage questions are also creating a backlog in the courts on both State and Federal levels with hundreds of pending cases involving Employer Liability and Workers Comp coverage. Many employees are seeking reparations from employers for failure to maintain a safe working environment and causing undue exposure that led to illness of an employee.
As lawmakers are working to get the Federal Safe to Work Act passed that would offer employer liability relief to 2024, there are several obstacles that pose delays in the process including Union representation and some Congressional office holders who do not support the bill (Here’s What Employers Need to Know about COVID-19 Liability Shields, Lisa Nagele-Piazza, JD, SHRM SCP, 9/4/2020). Meanwhile, state laws vary greatly in their interpretation of the employer’s liability to the employee. In most cases, there are some risk management suggestions in preventing lawsuits:
Follow CDC & OSHA Guidelines for Pandemic safety of employees
Being aware of employees’ health issues and illnesses while still maintaining a level of privacy
Staying updated on changing guidelines as phases of the pandemic response change
Transparency and ongoing communication with the employee base to create trust that the employer is concerned about staff safety
In short, the employer should not rely on future legislation to shield them from litigation related to employee safety. This is certainly an area of insurance that could see broad sweeping reforms and changes in how a policy responds to worker illness and employer liability.
Transparency in Coverage Reform
A third aspect of insurance to be aware of is the Transparency in Coverage reform that recently was enacted and became effective in a final ruling for January 11, 2021. This regulatory change will require group and private health plans and insurance issuers to provide benefits, costs, and out-of-pocket responsibilities to the client before a service is performed. According to the Federal Register, this act will serve to strengthen the overall experience of the policy holder in a variety of ways:
Transparency will enable consumers to be aware of their options and determine the best course of action based on costs of services.
Transparency will empower those groups that are support to the consumer base in making more informed decisions. These groups include researchers, lawmakers, patient advocates, and healthcare support businesses.
Transparency will protect against surprise costs associated with procedures and services by providing estimated figures before service is provided.
Transparency will drive competition and will contain cost variation and price gouging by requiring health services providers to inform the patient of his or her rights and responsibilities.
Transparency will likely drive costs downward because of marketplace competition and this will be of benefit to the consumer and healthcare insurance industry.(Federal Register, Transparency in Coverage 11/12/2020; www.federalregister.gov)
Insurance Help for Individuals is Coming
For individuals who deal with chronic health issues or are facing medical procedures, you should begin receiving documentation and/or communication that will inform you of your rights, responsibilities, and costs before moving forward on procedures. The hope with this legislation is that this will be a positive step in containing both medical services costs as well as insurance costs. Time will be a determining factor in how much the market is affected by transparency in pricing.
One thing is certain as we are just beginning our new year, 2021 will bring more clarity and perhaps a great deal of change to insurance coverage, insurance policy interpretation, and even the way insurance works as a means of protecting against losses. Our priority at Loomis Insurance is to help inform and guide your insurance coverage decisions with professional integrity and a desire to assist you with your insurance needs moving forward. We look forward to visiting with you.