COVID-19: PRESSURE POINTS: PRACTICAL TIPS FOR RENEWING YOUR BUSINESS’ INSURANCE PROGRAMME DURING THE COVID-19 PANDEMIC (GLOBAL/UK)

Many companies renew insurance coverage programmes at the moment of yr or might accomplish that over the approaching months. Renewals this yr can be undertaken in opposition to the background of a modified enterprise atmosphere and a brand new approach of working in mild of COVID-19. That can have an effect each on the dangers that companies wish to insure in opposition to and the practicality of finishing up the renewal. It’s important, subsequently, for companies to get renewal proper. So listed here are our 5 prime ideas for threat professionals who’re renewing their programmes over the approaching weeks (while additionally dealing with a myriad of different points).

1.  Don’t simply settle for COVID-19 exclusions at renewal

In our expertise, some insurers are in search of to include COVID-19 exclusions into coverage wordings. The Lloyd’s Market Affiliation have produced a particular exclusion for this objective. Different insurers might observe with their very own wordings. The LMA exclusion wording could be very broad and gives:

“Your Insurance coverage Coverage doesn’t / This Insurance coverage doesn’t {delete as relevant} cowl any declare in any approach attributable to or ensuing from: 

  1. Coronavirus illness (COVID-19);
  2. Extreme acute respiratory syndrome coronavirus 2 (SARS-CoV-2);
  3. any mutation or variation of SARS-CoV-2;
  4. any concern or menace of a), b) or c) above”.

To the extent attainable, policyholders will need to withstand the insertion of such broad exclusions. This may very well be accomplished by in search of to resume your coverage with out such exclusion, in search of to slender the scope of the exclusion, or, if a passable answer can’t be reached in time, by in search of to increase the present coverage pending renegotiation of the phrases.

As famous above, if insurers require a COVID-19 exclusion to be inserted, policyholders will wish to attempt to slender the scope of the exclusion as a lot as attainable. A few of the methods to slender the exclusion might embrace in search of to:

  • prohibit the causal connection required between the declare or loss, such that unfastened or oblique connections is not going to be ample;
  • insert wording to the impact that the exclusion is not going to apply the place there are concurrent causes (one to do with COVID-19 and the opposite unconnected). In any other case, the present authorized place is that the exclusion would prevail and the loss can be excluded even supposing there may be an unconnected concurrent reason behind the loss; and/or
  • restrict the exclusion to the present identified impacts of COVID-19 (e.g. on account of measures already taken by the Authorities) and never unknown future impacts.

The market is fluid and evolving. Many insurers are reportedly insisting on COVID-19 exclusions. It could not, subsequently, be attainable (or a minimum of might turn into tough or costly) to entry insurance coverage with no COVID-19 exclusion. The place a brand new coverage will comprise a COVID-19 exclusion following renewal, will probably be vital to make sure that any present claims, losses or circumstances are notified beneath the present yr’s coverage previous to renewal, as we talk about under.

2.  Think about what different coverage exclusions may chew following renewal in relation to circumstances identified or notifications made previous to renewal

Even absent a COVID-19 exclusion, losses arising from COVID-19 could also be excluded by advantage of a “prior identified circumstances” exclusion or a “prior discover exclusion”. Many legal responsibility insurance policies comprise such exclusions.

“Prior identified circumstances” exclusions usually present in substance that the insured can’t declare beneath the coverage for claims arising out of circumstances which the insured knew or must have identified about previous to renewal. How such an exclusion will apply in any given state of affairs will rely on the exact wording of the coverage and the info of the matter.

“Prior discover exclusions” function to exclude from cowl for claims arising out of issues which have been notified to a earlier yr’s coverage. Typically the exclusion is narrower in scope and solely applies if the insurer beneath the prior yr had accepted the notification.

With regard to “prior identified circumstances” exclusions, as a basic rule, there should be some causal connection between the info or circumstances and the declare or loss which happens. The very fact of COVID-19 might not itself be considered a identified circumstance, however its (identified) impression on the enterprise may be to the extent that’s related to the potential for insured occasions. For instance, while every matter is extremely truth and coverage particular, a enterprise might need a identified concern with servicing clients, have cancelled an occasion, needed to make tough choices in relation to members of workers, or paused building on a constructing website – every of which could lead to a future declare in opposition to the enterprise.

This has two key sensible impacts.

Firstly, claims arising out of circumstances identified about earlier than renewal may be excluded from cowl beneath the brand new coverage. Whether or not or not such concern will quantity to a circumstance will rely on the exact factual circumstances. A “prior identified circumstances” exclusion will solely have interaction should you do actually have a circumstance inside the which means of that exclusion.

In any occasion, policyholders must give a good presentation of the chance to insurers previous to inception of the brand new coverage (as mentioned under), together with disclosing any materials circumstances. Within the ordinary approach, insurers may search to include particular coverage exclusions. It could thus turn into clear throughout renewal discussions whether or not insurers contemplate there to be any circumstances which might be excluded from cowl following renewal.

Secondly, if a notification of a declare, loss or circumstance is made to the expiring yr, then you will need to gauge prematurely what impression which may have on protection beneath the brand new coverage in mild of any “prior discover” exclusion, notably if there may be any threat that the exclusion beneath the brand new coverage might need broader software than the language beneath the expiring coverage which attaches the notified matter (and sometimes causally associated issues) to that coverage. In any other case, gaps in protection might consequence. Will probably be notably necessary to make sure that there’s a easy transition between cowl beneath the totally different coverage years the place you’re altering insurer.

It is necessary, subsequently, to assessment the proposed exclusions within the new coverage wording holistically and to know what COVID-19 losses may or won’t be lined, taking account of present information and notifications previous to renewal. The place there’s a potential threat of a spot in cowl (e.g. on account of an unduly broad “prior circumstances” exclusion), then curing that concern must also be entrance and centre in any renewal dialogue.

3.  Make sure you notify all circumstances, claims and losses to expiring insurance policies previous to renewal

To minimise any threat of falling foul of exclusions in subsequent yr’s coverage, together with not least COVID-19 exclusions, it’s strongly advisable for policyholders to take the time to think about now what if any issues, reminiscent of claims, losses and circumstances in respect of potential claims/losses, are probably able to notification to the expiring coverage yr. This needs to be stored beneath assessment as much as renewal – and past if grace intervals for notifications apply.

When notifying a circumstance to an expiring coverage, care needs to be taken to get the notification proper. This sounds straightforward, however ceaselessly offers rise to insurance coverage disputes. The article is to make the notification in such a approach as to connect future claims or losses to the coverage yr to which the notification was made on as broad a foundation as attainable. This includes figuring out what the insured is aware of and placing the suitable stability as to the scope of the notification that may be permissibly made in mild of these identified info.

It’s attainable to inform a circumstance in respect of an issue (or a hornet’s nest of issues), even when the insured doesn’t presently know what the trigger or impression of the issue could also be. For instance, on renewal of a D&O coverage, consideration may very well be given to notifying points with vital choice making exterior of ordinary governance parameters or a drop within the firm’s inventory value if that would result in a securities motion. There may be, after all, a stability to be struck as a result of a broad blanket notification of circumstances is probably not legitimate whether it is too obscure. In the end, whether or not a notification is legitimate will rely on the exact factual circumstances.

As ever, the coverage will usually comprise situations as to how and when notifications could also be made, and the insured ought to take care to adjust to these: the golden rule is to ‘do what it says on the tin’.

As half and parcel of the above, the place a declare or loss has been notified to the expiring coverage yr, additionally it is value contemplating whether or not there must also be an accompanying notification of circumstances, notably the place the declare pertains to a possible points which may have an effect on different potential claimants.

4.  Guarantee your wording is match for objective in mild of your new threat profile

The chance profile of companies may have modified to some extent in mild of the present pandemic. The obvious instance maybe is that companies have needed to adapt and alter their methods of working, albeit this can be short-term. It’s subsequently necessary for policyholders (along with their brokers) to assessment the present threat intimately in opposition to any proposed new wording, and never merely to roll over present wording. For instance, some property injury insurance policies set a most time frame for which premises are permitted to be unoccupied. Such clauses might must be disapplied or amended to allow longer intervals of unoccupancy within the present circumstances. Some insurers are already providing revised phrases in that regard. Equally, sensible points might come up if a notification clause requires notification by a specific means or to a specific particular person, if that mechanism doesn’t replicate how the recipient insurer is presently working.

5.  Adjust to the responsibility of truthful presentation in a world of dispersed working

The Insurance coverage Act 2015 requires the insured to make a good presentation of the chance to the insurer. This includes disclosing each materials circumstances which the insured is aware of or must know – or, a minimum of, disclosing ample data to place a prudent insurer on discover that it must make additional enquiries for the aim of unveiling these materials circumstances. An insured must know what ought to moderately have been revealed by an affordable search of knowledge obtainable to the insured. The Act requires the insured to make the disclosure in a fashion which might be moderately clear and accessible to a prudent insurer. This responsibility will nonetheless apply however the COVID-19pandemic. It does current insureds with quite a few sensible challenges. That mentioned, our understanding up to now is that renewals have been continuing comparatively easily with the required diversifications.

Danger managers might want to work out the best way to perform an affordable search while many individuals within the enterprise can be working remotely. That can contain figuring out early on the people inside the organisation who may have entry to the related data and information, and asking them for his or her enter in good time. It can even be necessary to work out the best way to current the data to insurers in a transparent method. If the insurer would normally undertake a website go to, which may must be changed with a digital video tour. Likewise, in-person threat shows will be substituted with on-line video calls and shows.

It’s value taking into account that insurers can even be adjusting their underwriting strategies and attending to grips with distant working themselves. They are going to be occupied with understanding any modifications to the enterprise’ threat profile in mild of COVID-19, as this may increasingly have an effect on the pricing of the chance and renewal phrases. The renewal course of might subsequently take longer than ordinary. It’s a good suggestion  to interact early with insurers and have an open dialogue about what underwriting data they may want and the way they want it to be introduced to them.

The place an insured or insurer is virtually unable to undertake a search or current the chance within the ordinary approach, early communication can be key. For the policyholder particularly, will probably be necessary to verify the insurer is aware of what can and may’t achieved. What counts as a ‘cheap search’ could also be totally different within the present circumstances, however relatively than the events debating after the occasion what was cheap, the safer course can be to acquire an acknowledgement from the insurer upfront that the responsibility of truthful presentation is certified by any limitations which the insured encounters.

The insured must also contemplate whether or not their coverage incorporates the most effective obtainable harmless non-disclosure clauses or different phrases coping with presentation of the chance, so as to minimise the chance of insurers having a treatment, notably the place there was an inadvertent breach of the responsibility of truthful presentation in consequence of the present circumstances.

Lastly, it’s value being conscious that there’s a chance that you simply might be able to receive a coverage extension for a short time if renewal appears like it can must be delayed. There are a variety of auto-extension clauses obtainable out there e.g. from the LMA. Nevertheless, if that is an choice that you’re contemplating, a brand new responsibility of truthful presentation will apply to something related to the extension until insurers agree expressly or impliedly to waive any additional disclosure requirement. Once more, early communication and acceptable protecting steps can be key.

Conclusion

As at all times, one of the simplest ways for an insured to guard its place on renewal is to begin early, talk effectively and take acceptable steps to lock-in protection beneath expiring wordings and search greatest in school wordings on renewal. An insured that fails to take acceptable steps, and easily goes by means of the same old motions, might effectively discover itself with gaps in cowl for COVID-19 associated claims that would have been averted. This sounds simple, however a proactive and diligent method might make all of the distinction to a enterprise’s stability sheet the place it’s confronted with COVID-19 associated impacts.

 

Greig Anderson

Rachelle Waxman

About Bilgi

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