Businesses that have been forced to close due to COVID-19 may have been hoping their business interruption insurance will cover their losses, but many policies exclude coverage of interruptions to business resulting from viruses or pandemics. But those who hold policies that exclude this coverage can take heart: they are no worse off than those whose insurance policies do explicitly cover interruptions resulting from viruses or pandemics. By and large, insurers are denying their claims as well.
There is, of course, not enough money in the insurance industry to cover an economic shutdown on such a massive scale. But not only are insurers denying coverage to businesses; they are also increasing premiums. Many business owners are already receiving renewal notices from their insurers with premiums of 50 percent higher than last year, including owners of businesses that are effectively shuttered.
While the macro global insurance premium will likely ultimately drop as a result of COVID-19 because many businesses will close and there will be fewer businesses to insure, the number of claims will also drop as long as no one is out and about. Even if the economic shutdown lasts for only a couple of months, this may well be an enormous savings for insurance companies. Business owners, on the other hand, are having to rely on the various programs that the government is rolling out, which may or may not be enough to see them through.
The government has so far promised a credit for car insurance, which effects the general voting public. Thus far, however, the government has not yet made it clear that it will not stand for price gouging in the insurance industry, or otherwise stepped in to mediate the challenges businesses are having with their insurers. While it may be mandated that this coverage must be made available in the future, that does not help businesses in their negotiations with their insurance companies now.
For those whose policies do explicitly include coverage for an interruption in the event of a virus or pandemic, insurers are denying coverage for apparently no valid legal reason. Rather, they seem to be counting on businesses going under before they are able to get their claim to court.
In Fischer et al v. IG Investment Management Ltd. et al, 2012 ONCA 47, former Chief Justice Winkler identified three goals that class actions can accomplish: access to justice for claimants who otherwise can’t afford it, behaviour modification for defendants who otherwise will continue their wrongful conduct, and judicial economy for the courts who might otherwise be overwhelmed by the sheer number of claims. The collective claims of insured people hard gunned by stubborn insurance companies falls directly into all three goals.