Coronavirus Insurance Claims May Be Biggest Industry Loss Incident In History: Report

Insurance companies are facing increasing pressure from businesses to meet obligations to cover losses associated with the coronavirus outbreak, and estimates suggest that losses associated with this one incident could cost hundreds of billions of dollars.

In a report by Reuters News published on May 4, analysts predict the cost of covering losses from the COVID-19 pandemic is likely to be many times the amount paid out due to damages from the 9/11 attacks or Hurricane Katrina. In fact, they warn that the ultimate cost could top half a trillion dollars or more, and may be the largest insurance loss incident of all time.

The novel coronavirus outbreak began to emerge in the United States in January 2020, and by March much of the country was shut down to reduce the spread of the virus and promote social distancing. However, COVID-19 has become a global pandemic, which has sickened more than 1.1 million in the U.S. alone, and caused at least 66,000 deaths here as well.

Because of statewide “stay at home” orders, many businesses have been forced to close, lay off employees, and are suffering massive losses. Many business owners turned to their insurance policies, which they believed were meant to cover losses due to business disruptions like this. However, many insurance companies are denying claims, regardless of what was actually in the policies they sold and collected premiums for.

A growing number of coronavirus insurance coverage lawsuits have been filed nationwide in recent weeks, each raising similar allegations for breach of contract by insurance companies and their underwriters.

While insurance companies have attempted to deny business interruption claims based on clauses that exclude coverage for pandemics and viral outbreaks, the lawsuits point out that the business losses are not caused by the loss of customers who contracted the virus, but rather due to “civil authority” actions that have required businesses to shut down to prevent the spread of illness.

However, it is not just businesses filing insurance claims. They are also being filed by consumers looking for workers’ compensation, and by event organizers and venues that were forced to cancel concerts, conventions and other mass gatherings.

Some experts say that, depending on how successful coronavirus insurance lawsuits are, the cost of losses in the U.S. and U.K. together could be from $11 billion to $140 billion, while other experts indicate the losses could surpass $500 billion, particularly if states step in to force insurers to cover business losses.