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Featuring:
Jim Hamilton, CRC Denver
Trey Willams, CRC Norcross
Property
COVID-19 is likely to impact businesses both directly and indirectly, inspiring policyholders to evaluate both first-party and third-party coverages for relief from losses. With any claim, policy language, specific triggers, and loss drivers must be evaluated to determine if coverage applies. It’s expected that most property policies may not be triggered by COVID-19 losses because shutdowns caused by pandemics generally do not meet the physical damage trigger requirement inherent in standard property policies, and pandemics are often specifically excluded (source). However, there may be a property coverage extension available from some markets that includes coverage for business income losses resulting from the enforcement of a law or ordinance by an authorized governmental agency intended to mitigate the spread of communicable disease. The coverage effectively adds a communicable disease trigger to the Civil Authority coverage extension. The coverage is generally reserved for clients meeting a certain premium threshold on their all-risk policy and is typically provided with a sub-limit not to exceed $250,000. Most large company carriers’ underwriting authority caps out around $2.5 - $5M for larger entities such as hospitals or casinos. Due to increasing concerns around COVID-19, most carriers are performing internal audits to quantify their exposure to the virus whether extended through the Interruption by Communicable Disease Extensions or embedded within manuscript forms. Not only are carriers re- examining communicable disease coverages, but they are also taking a close look at other property coverage extensions that do not require a physical damage trigger. It is not unreasonable to expect a reduction in underwriting authority for these coverages, which will lend itself to additional exclusions or nominal sub-limits intended to act as a defensive cover.
Environmental
Outside of the property arena, some may begin looking to environmental insurance policies to address coronavirus related losses. So far, the environmental marketplace has been divergent in their response to COVID-19. Over the last 7-14 days, a few carriers have established that all new environmental quotes issued will contain a virus or coronavirus- specific exclusion or some form of communicable disease exclusion. On the other hand, some of CRC’s environmental carriers have taken the opposite approach and are viewing this outbreak as an opportunity to provide affirmation of varying degrees of coverage for virus/bacteria by including it in the policy’s definition of microbial matter, pollutant, or pollution condition. Some policies may cover bodily injury, property damage and clean-up costs while others may only offer coverage on a sub-limited basis for clean-up costs or disinfection expense. In either case, the bodily injury and property damage coverages are 3rd party claim tr
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Dan Wentz: 0:00
CRC group is open for business and were prepared to continue to handle your wholesale placement servicing needs now and as the Corona virus situation develops. If you have any questions, please don't hesitate to reach out to your CRC group broker during this time. If you need to find one, search the mountain at CRC group dot com. Also, we want to assist in helping inform you and your clients about the possible impacts from Corona Virus and will continue to do so through our podcasts and email newsletter, all of which are available at CRC group dot com. Under the Tools and Intel heading. Find our latest podcast episode, which discusses the impacts on senior living facilities with CRC Group health care specialists. It was the episode right before this one, and in this episode we focus on environmental and property. This is the placing you first podcast. I'm Dan. Once in this podcast features news and insights from Sierra Seas Vast knowledge base of 600 plus producers right in excess of $8 billion in premium, and we're giving you insider access to what's happening in our company and the current trends in the types of insurance place on this edition of the podcast. After that, we have the sickness and the movies, and the entire people scare environmental insurance scheme in the plane during those times as well. So it's not entirely a new concept. Coverage with Armin Insurance Market. It'll be interesting to see how the market responds toe run a virus in comparison to the stars, and this is the placing you first podcast. Okay, so we've got Jim Hamilton on the phone. He's a senior broker. CRC Denver office focuses mainly on environmental risks, and Jim does a lot of work for us here. CRC Group on the environmental side and Jim. There are some major effects, would you say, for our reactions to the Corona Virus Cove in 19 in the environmental insurance spaces that right
Jim Hamilton: 1:52
there Good morning down. You're absolutely correct at the Corona virus has impacted the environmental insurance market, and there's been quite a divergent response to covet 19. Within the environmental insurance market. Over the last few weeks, several carriers have come out and made a statement that going forward on new business quotes, they're going to introduce either of virus or bacteria or virus and bacteria exclusion or a communicable disease exclusions or some form of of coverage limitation on the quotes. They're not retroactively changing any coverage, but they they are looking at putting some type of limitation on the coverage going forward.
Dan Wentz: 2:30
So what about the existing coverage is out there? How does this play into policies that people already have?
Jim Hamilton: 2:36
And a great question. Dan the Kim. The marketplace is very divergent, and and how they do or don't respond to a virus or bacteria as either a pollutant, a pollution condition or some other affirmation of coverage within their policy. For there are some carriers that do include either within the base policy form or by endorsement. They do include an affirmation of virus and bacteria as a pollutant or in the broader aspect. They include my reserve bacteria in the definition of collusion condition. And as such, with an affirmation of coverage like that, you can trigger not only bodily injury and property damage coverage potion of your sight pollution policy. You can also trigger the cleanup cost coverage, pushing out of your sight pollution policy. So we have a lot of our real estate portfolios for hotels, apartments and healthcare facilities. The center. They're taking a very close look at their carriages and devastating probably three out of every 10 calls that get during the day. It has to do with chronic virus. At this point, I just finished a webinar. We had a deep dive discussion on the intricacies of coverage. What proceeding? Language means what different coverage parts can be triggered by virus as a prudent or pushing condition. Interesting topic that always comes up. Is this interruption coverage,
Dan Wentz: 3:59
right? Yeah,
Jim Hamilton: 4:00
we're spending a lot of questions on that. If the policy form has fibers affirmed as either pollutant or pollution commission, we can trigger bodily injury in property damage coverage. We can also trigger cleanup cost coverage when cleanup cost coverage is triggered. We can also trigger business interruption to the to the extent that there's a cessation of operations or partial cessation of operations at an insert facility. We can receive this interruption payments for the downtime or the loss of profit during the course of Klina, and stress that nearly all the carriers have that type of language that they paid business interruption, four year downtime or lots of profits during the course of cleanup, typically on an environmental cleanup. It's a protracted process where we have to pay up soil groundwater. It might impact the client's business substantially over the period of weeks, months or years. In the case of Corona virus were seen is that the actual disinfection, or clean up only takes a day or two days, maybe three days at about, even for large facilities. We've had some more department communities and university facilities that have had to go through disinfection. It only took a couple days. Most of the business interruption coverage portions that we have placed on site pushing policies typically have a three day or five day waiting period. The tactic? Well, we might be able to trigger the cleanup house coverage and by virtue of that trigger that business interruption coverage we're seeing most of the activity or disinfection activity fall within that three day or five detectable period. There's another aspect of concrete or affirmation of coverage that some carriers provide, and that's disinfection costs. So unlike cleanup cost coverage, disinfection concert coverage is typically a very defined scope of coverage. It is often sub limited, and it is limited to a certain period of time. Well, the disinfection cost coverage is valuable. It does not have the ability, with most curious forms, to be able to trigger a missus and election coverage. So you have to look back towards carriers that have little bit broader language where we can trigger cleanup cost coverage and then triggered this interruption. If we just have to stand around Disinfection Cask Average, which is extremely valuable coverage well, not always trigger. Be able to trigger business interruption coverage as well, so that there's a large disparity of months. A carrier's how they treat viruses. Bacteria. A number of carriers are actually silent.
Dan Wentz: 6:20
Some
Jim Hamilton: 6:21
carriers make no affirmation of coverage for recognition of virus or bacteria. They also may not necessarily. Excluding those policies are kind of gray area coverage. There might be coverage. I might have to have a meeting of the minds with the carriers in an acclaimed situation that you will see how this policy structures play out. There are a number of quite a few carriers that under cycle Asian policy forms, actually have a communicable disease. Exclusions that well may not totally bark average. It certainly impact coverage for bites.
Dan Wentz: 6:57
So
Jim Hamilton: 6:57
again, every carrier is different, how they handle it and this type of exposure. So you really have to dig into your policy Parman and Saddam with with a broken and analyze what coverage may or may not be there.
Dan Wentz: 7:09
Yeah, So it sounds like this is really an unprecedented thing for us. We haven't seen something like this for 100 years or more. Gotta figure it all out. Figure out where where you're covered, where you're not covered. And, of course, the CRC broker can help you do that. So what would you say right now? So those people, they're looking at their coverage reach out to you, start the conversation now about it are what do you think?
Jim Hamilton: 7:30
Yeah, definitely. Take a look at your operation or your client's operations and discern what the type of exposures there might be for your app. Defiant and then work with the broker dispersed in environmental insurance. And you mentioned that, you know, this is a bit of an unprecedented situation for a lot of insurance industry for the environmental insurance industry. In fact, it's not
Dan Wentz: 7:51
as
Jim Hamilton: 7:52
much of the new think breast. If we look back and say, like 2003 we had starters. After that, we had Ah Zika pandemic family as they went, went through the entire Ebola scare. Environmental insurance came into play during those those times as well, so it's not entirely a new concept of rich within the environment insurance market. So we're we're tuned to that. It'll be interesting to see how the market response toe grown a virus in comparison to the Stars and Vika and Ebola and how the market responded that those situations it's not and foreign concept, you know, look burned by minute insurance for you expect
Dan Wentz: 8:30
right. And so, in the case of SARS and Zika, the exposures didn't really materialize the way that people thought they would.
Jim Hamilton: 8:36
You're absolutely correct. Yeah, there was a lot of scary. A lot of tears came out with exclusions, and after everything subsided, the actuary ISI underwriters took a look. Att. What happened? Analyzed the exposures, and that's when we began to see a number of carriers actually give a permitted coverage or virus bacteria. There is meaningful coverage in the marketplace for this type of exposure that it's requisite the use of my broker toe to make sure you're getting what you're expecting from your pulse.
Dan Wentz: 9:04
And, Jim, you are definitely one of those as well, Loza. The rest of our CRC brokers across the country. You can contact anybody to start a conversation today, of course, were available online. CRC group dot com were open for business, but we definitely we're here for you. And we're here to answer your questions and to help connect you with the right people to get the right coverage during this time. So thank you very much, Jim. I appreciate it. And we probably will be checking in with you again before this whole thing's over.
Jim Hamilton: 9:34
Not a problem.
Dan Wentz: 9:34
Thank you. Placing new first broadcast right now I've got a tray Williams on the phone who is a broker property broker in Norcross, Georgia. Office. Which is Atlanta, right? Same thing. Rex, sir. Little bit, little bit up. But outside of Atlanta, and just like the rest of the state's cross country Atlanta has. Well, Georgia in general has seen some some cases from Corona virus. As most of the country, I think we may be up to 50 states. I haven't checked it, but in any case, what's the effect on ah property insurance So let's let's start there. And I'm reading that most property policies air not gonna be triggered by these cove it 19 losses. Is that right? Is is that accurate?
Jim Hamilton: 10:18
Yes. You know, a copy of that would, uh you know, I don't want you to speak to a specific claims, but yet, um, So the property damage for the physical damage rather trigger inherent with most property policies isn't gonna be triggered with lost through the shutdown by a part of the pandemic. Um, so they not only doing the physical damage shiver? Not yet, but it you gotta have uncovered couple locks, right? So a lot of areas and then a lot of the ice forms that a virus and bacteria explusion. Um, let's precludes coverage.
Dan Wentz: 10:54
I was going to say, What about thes situations? Where the government's is or the authorities are facing are forcing businesses shut down because of this pandemic. I mean, it's happening all across the country. Restaurants were closing. Most businesses are in some sort of stay at home work or not functioning like they normally do. Is there any kind of ah coverage for
Jim Hamilton: 11:14
that? Sure. Yeah. So where people are looking for the coverage. Correct abuse again now is they're working out Their little authority covers extension, which is its suspension caused by a government body. But that coverage extension also requires physical damage sugar, and it requires the loss to be recovered. Puzzle lock. So again, but the virus exclusion of death in your policy, you know, no dice, but the physical damage sugar is interesting. The intent is not recover. Carriers are well aware of that. Now that with the clan's coming in, you know, we're gonna see the test, even lower court. So we'll see constantly taking banned sugar. We're gonna have that conversation. And so now we're seeing, and the legislative body is coming out with, you know, bold that old legislation essentially look into the insurance carriers as they ah sources bailout funds. We've seen it in a couple different states. Carriers, for the most part, are largely property girls, for the most part of largely immune to this. You know, 100 slipped in my pond where after either they excluded it or they box it in into a ah small coverage extension where they provided a nominal limit essentially intended active cover. Now, I heard it through. The PNC cares. The way I see it is that simple. You know, we're going to see the civil authority and what constitutes physical damage. Shooter test for a second. You know, I think there is an outside chance that we see government intervention, and we see it Potential liberalisation in terms one state found arms. Lawmakers and underwriters are looking quote, leading civil authority trigger and the policies that do extend that extension. You know, I think they're gonna be on there under the microscope here, and I'm not of the mind. The carriers have any reliability here, right? Uh, it's not outside factors working again then that, you know, there are We're gonna be lobbying again.
Dan Wentz: 13:17
Yeah, that makes sense. You don't feel that the carriers are gonna be, uh, gonna have a lot of liability here, aren't going to swallow this
Jim Hamilton: 13:25
would only from the property. Said, um, you know, as an aside at once would be Ah, employeesbenefits markets are doing on gwen. Seek the, you know, accommodate their cuts, whether or not they have a new language, you know all that as a trickle down effect into the barrel in chief, which all of it obviously affect the being carriers
Dan Wentz: 13:46
moving
Jim Hamilton: 13:46
tactic again.
Dan Wentz: 13:47
Yeah, a lot of a lot of factors at play, and I don't think that anybody quite knows exactly where this is. All gonna end up
Jim Hamilton: 13:54
custom that cover now. And this is more for the clients, that happiness, this coverage ing. You think you can be a nonstarter for every underwriting company out there? So in the path, you know, we're all aware that we have a softening market. Um, you know, 17 shake orders of rate decreases, and would that there was a liberalization filling in position. Right? So this was this was brought on by company provides very fans where they added additional coverage is where the what's traditionally provided on the right forms, right? Cos when you know, he gained an academic advantage, and then you wait and see is an influx more broker manuscript, you know, really speaking to clean the clients that they're much broader and skull finger to traditional property cover. We're seeing a lot of carrier support. These now, obviously, is Mark. It burns it up a little bit or we're seeing a lot back then. A lot of that, but the the covers that comes to mind when there's a health care coverage that many AH standard property king was. We're extending for their health care clients now. E stay this. It's generally reserved for clients and upper middle market range. We're talking able to experience of 100 check. There was an interruption by a communicable disease cover, which, potentially in different coverage extension, reacted the same way that a little already would react. But it added a interruption by communicable of these trigger to physical Danny shirt typically described. And so companies started deploying this and they were counting a competitive advantage. But they were also deploying someone that never nominal for the effect that really there, ext in the defensive cover from the scenario that we had current toe where it eliminates the kind of legal question and they covered it, did not know it specifically described. Here, you got a 50 k supplement on a very strict check. This kind of how it was intended to work. Now you know, working stop in. We saw underwriters kind of maxing out authority to the coverage extension, so we saw a limit for the larger health care programs. I'm talking my mom a health care system. I mean, we're seeing upto 5 $10 million interruption back. Beautiful. These cover obviously walking that back now Carriers of performing intern allotted to quantify the exposure that extended in the marketplace. Not only are they looking at that covered statistically, they're looking at all other covers where they expanded the kind of the definition of physical damage to her people. So we did. The other coverage is coming out like crisis management. Which kind of them attacked the shooter That coverage cyber with the hot putting, That kind of expanded the physical damage sugar. Sure, we had many podcast from that. Um, we're taking a walk back of all that. Not in reasoning with. I think that many carriers and stripped their field underwriters of the 40 of these triggers requiring essentially a Home Office review and not a standalone basis. Obviously announced our renewal business renewal business from lives King are for those customers that have it. I wouldn't expect a habit going forward. We do have it. I expect no warning. Joey, What was once counted as a competitive Dana Jonas suna suna the trigger it Paulson, We walking back, right? Kind
Dan Wentz: 17:12
of
Jim Hamilton: 17:12
cyclical measure, intrigue, which worked. So yeah, that that that was the one coverage. And if you had it, your lucky, uh, didn't
Dan Wentz: 17:21
expect to
Jim Hamilton: 17:21
have it in the future. I've got a handful of clients with it and swing a client as interim union threshold where it makes sense to deploy defensive cover. So you will be, you know, you're pregnant. 1,000,000 growth and you've got a 25 cases of interruption back. People think cares, lost rations. Not gonna be a happy thinking that it is a smaller kind again. It no kind of get it.
Dan Wentz: 17:44
Okay, well, great good information there about how Corona virus is affecting the property insurance market. I'm sure we'll have plenty more updates as we find out more about exactly what the reactions to this they're gonna be and what it's starting to look like. Renewal for everybody's thank you very much. Tray in the Norcross office out there in Atlanta. We appreciate you joining us today and getting us up to date placing first broadcast. A quick note CRC group is hiring, and we want you to join our team CRCS expanding nationwide, opening new offices and hiring at all levels. Join one of the nation's leading wholesale brokers today by finding the Careers page on CRC group dot com. Also, stay up to date with everything CRC By following us on LinkedIn, we'd love to start a conversation with you there and make sure you subscribe to the Tools and Intel newsletter. We send out our latest white favors and reports to our subscribers, and all we need is your email address. It's an easy sign up at CRC group dot com. It's for joining us on the placing you first podcast.