Sorry, We Can't Pay Your Insurance Claim. It Would Cost Us Too Much.

Written for Bacon’s Rebellion by Dick Hall-Sizemore

For the past 17 years, my wife and I have rented a house at Sandbridge in Virginia Beach for a week in late May. My daughter and her family, including the three grandkids, come down for the week. It is the highlight of our year.

This year was no exception. A year ago, we reserved the week of May 16-23. Then, of course, the coronavirus intervened. The governor issued an executive order telling everyone to stay at home unless it was absolutely necessary to go out. Stores and restaurants were closed. Would we be able to go to the beach? What about all that money I had already paid (the entire balance due)?

I was not too worried about the money. After all, I had opted for the travel insurance. Then, I decided to read the fine print on the policy and began to get worried. I called the insurance company. I couldn’t get through; the recorded message told me to go to the company’s web page. I sent the company an e-mail asking if my situation was covered under the policy. I got back a boilerplate response telling me how to file a claim. I called the Bureau of Insurance at the SCC. The staff member I talked to was very nice and sympathetic. He told me that, without a copy of the actual policy, he could not tell me for sure whether my situation was covered, but, from what I told him, it probably was not. I sent the insurance company another e-mail, explaining that, under the terms of my policy, “quarantined” was a “covered event” and that the Governor had directed all residents to stay in their homes except under specific circumstances. My simple question:  did this qualify as a covered event? A month later, I am still waiting for an answer.

My situation pales in comparison with that of others. I remember reading in the Richmond Times-Dispatch a restaurant owner’s lament about loss of business in the early weeks of the pandemic crisis. He said that without an order closing the restaurant, his business interruption insurance would not cover his losses. He probably got a surprise when he was ordered to close and tried to file a claim with his insurance company.

After the 2002-2003 SARS epidemic, many insurance companies wrote exclusions for viral epidemics into their business-interruption policies. However, even those without such exclusions are refusing to pay damages to businesses that had to close due to the coronavirus pandemic, including those with “All Risk” coverage. The insurance industry’s position is that, traditionally, business-interruption had to involve physical damage to the property in order to be covered. In addition, it says, assuming liability for all the lost income would bankrupt the insurance industry, despite its $822 billion in cash reserves. Business owners are crying foul. “All risk is All risk”, they contend.

As you would imagine, litigation is breaking out all over. President says that the insurers should pay unless there is a specific exclusion for pandemics. Congress is getting into the act with bills to make insurers pay retroactively, require insurance policies in the future to provide pandemic coverage, and setting up some sort of refinancing program. It is another mess created by the pandemic. Ironically, two years ago, the insurance giant, Marsh, offered a business-interruption policy that included pandemic coverage. It did not sell a single policy. There is a lot of interest in that product now.

As for me, the owners of the Sandbridge house were very accommodating. They allowed us to change our reservation to the last week in August, right before Labor Day. There was no penalty for moving the reservation, although I was faced with a higher rate. Now, I have to worry about whether there will be a resurgence in the virus in late summer and everything gets closed again. If that happens, I hope there will be a hurricane hitting Virginia Beach that week.

A hurricane is a “covered event” under my travel insurance policy.