How IBAO wants brokers to treat pandemic business interruption losses

With the widespread impact of pandemic-induced business income losses, the property and casualty industry is looking for a good way of dealing with a high volume of potential business interruption notices of loss.

“The IBAO is asking business clients not to flood insurance companies with claims at this time,” said Colin Simpson, CEO of the Insurance Brokers Association of Ontario, in an interview with Canadian Underwriter. He was referring to business interruption policies where clients are looking for written confirmation that the COVID-19 income loss is not covered.

“The industry needs to work together to ensure it responds to the public in the most effective, efficient way that we can,” said Simpson.

Generally, business interruption insurance is usually only triggered when a client is hit with a peril covered under a property policy. So for many BI policies, income loss arising from the COVID-19 precautions will not be covered because – unlike in a flood or fire – there was no damage to the property itself.

Moreover, some clients who are not covered may be looking to the government for assistance. Along with that, those clients may want proof that they do not have insurance coverage.

“With respect to business interruption coverage, brokers should be advising their clients not to automatically report all claims directly to the insurance company,” Simpson said Friday. “The broker should review the coverage with the client and report the claim only if coverage is available.  If no coverage is afforded, the broker should log these claims. It is always a prudent approach to fully document a loss.”

Hub International described its strategy to Canadian Underwriter earlier. Hub is taking the position that if the pandemic has had an impact on a client, that client should report the business interruption loss and let the insurance company come back with a formal decision on coverage.

This is especially true if the government offers relief to business on the condition that the loss is not insured. In cases like this, the client would need, when applying for relief, to demonstrate the loss is not covered.

For his part, IBAO’s Simpson notes that Canada-wide, there would be a large number of businesses that have closed down, such as restaurants.

“There has been and continues to be significant discussion in the marketplace regarding the issue of business interruption insurance,” said Simpson. “Many insurance carriers have already issued their own clarifications regarding their policy wordings. Generally speaking, BI policies only cover physical loss or damage to property although there are exceptions. IBAO confirms that brokers should closely review any specialized policies or extensions that may potentially apply to their client situation.”