Silence may be deadly for property/casualty insurers writing commercial insurance, an executive of an InsurTech that specializes in analyzing insurance policy language suggested recently, explaining that without specific words addressing pandemic risks, insurers might face claims down the road.

In a new publication from RiskGenius, CEO Chris Cheatham describes the possibility that the absence of language explicitly covering communicable disease claims or exclusion clauses in commercial insurance policies will put more carriers on the hook to cover business interruption and other claims. In fact, RiskGenius estimates that roughly 80 percent of commercial insurance policies are “silent” or vulnerable on communicable disease coverage.

In a post on the RiskGenius Insurance Prospectus blog, Cheatham notes that while many attorneys believe other provisions in a Silent COVID policy would exclude coverage, such as the need for physical damage to trigger coverage, his team believes this issue may arise in claims and litigation.

“While insurance experts would be correct in asserting that insurance policies silent on communicable diseases traditionally do not cover communicable disease losses, we are focused on what may occur with unexpected court rulings or new laws and regulations,” he wrote in an email newsletter about the blog item.

Already, legislation was recently proposed in New Jersey seeking to retroactively cover small businesses for COVID-related interruptions, regardless of whether policies have virus exclusions. And members of Congress have written a letter to insurance industry trade groups, likewise seeking retroactive coverage, acknowledging in their letter that the business interruption coverage in many commercial property policies is triggered by “direct physical loss or damage to” insured property.

“I view the Coronavirus Pandemic as something different; this is a Black Swan Event.”

Chris Cheatham

Citing opinions of insurance experts who suggest that P/C coverage beyond travel and trade credit specialties is minimal, Cheatham says that these insurance professionals are assuming a normal loss event in which traditional legal analysis will apply.

“I view the Coronavirus Pandemic as something different; this is a Black Swan Event,” Cheatham wrote in his newsletter.

Attempts by courts and legislatures to step in and modify insurance policies that may not cover disaster events are not without precedent. Battles over the anti-current causation provision in the aftermath of Superstorm Sandy are a recent example. Cheatham cited earlier battles over pollution exclusions in commercial general liability policies when asked to recall other parallels.

Drawing a comparison to the silent cyber issue in his blog post on COVID, Cheatham explains why he believes the silent COVID coverage issue will dwarf the cyber counterpart in frequency and intensity. (The “silent” descriptor in the cyber scenario refers to the fact that many traditional insurance policies covering property damage, theft and business interruption do not have specific exclusions for situations where cyber attacks on operational technology cause losses, nor do they have clear grants of coverage.)

RiskGenius, whose software empowers insurance professionals (underwriters, brokers and everyone in between) to assess emerging risk exposure throughout their entire portfolio of insurance policies based on the policy language, will be releasing iterative Silent COVID checklists to assist in the analysis of commercial insurance policies.

According to Cheatham, RiskGenius has processed over 80,000 insurance policies and forms and over 1.5 million insurance clauses. While they are almost all U.S. commercial P/C policies rather than non-U.S. forms, he said they include virtually every line of business—property, GL, BOP, auto, umbrella/excess, crime, inland marine, etc.

Asked about feedback he has received from carriers in response to the Silent COVID blog post, he said that RiskGenius completed COVID Coverage analysis for two top-50 insurance carriers. RiskGenius is also making COVID Coverage checklists publicly available in order to assist carriers with a recent request from the N.Y. Department of Financial Services, directing them to provide commercial property policyholders with an explanation of benefits under their policies connection with COVID-19.