While some law firms are laying off and partners are taking pay cuts, two kinds of law firms seem to be reviewing summer boat catalogues: Lobbyists and Plaintiffs.
Regarding whether coverage exists for business interruption claims, let's get past the argument common to two-year olds where the answer to everything is: "No." This argument is pointless on multiple levels:
There’s only about a jillion different insurance forms so any kind of uniform answer to whether coverage exists expresses a high degree of excessive simplicity. Professional coverage reviews are specific to form and situation, not speculation.
The dollars involved are far too large and if going bankrupt, what does an insured have to lose by suing?
A strategy will be to sue and hope to settle for something.
For these reasons, at the least, agents absolutely should not make the mistake of telling insureds they have no coverage. That would be E&O mistake #1.
Claims already are being filed for other coverages such as D&O, general liability, worker's comp and even medical malpractice. And whether COVID-19 is the proximate cause, the economic downturn will result in other kinds of claims, as downturns do. To therefore tell a client they have no coverage, without being extremely specific to a given form would be an even worse mistake. They may have coverage under other forms for different aspects of this pandemic.
Under these other forms, at the least, their defense coverage may be the most important aspect of their policies. Is their defense inside or outside policy limits?
And where policies provide no coverage, E&O policies might. I suspect a large increase in E&O claims will occur. Whether agents lose those claims is another story. If history holds true, agents will win the vast majority of the claims filed but get prepared. Those agencies that had good procedures, who followed those procedures, and who used coverage checklists well should come through this especially well.
It might be a good idea to review with your producers and staff your E&O carrier's guidance on what to do if sued. That sounds pessimistic but in past catastrophes, the volume of E&O claims, including really baseless claims has been extensive. The baseless claims are often the worst. My recommendation is to not make a baseless claim payable due to the lack of preparation, the lack of instruction resulting in someone saying the wrong thing.
There is a human tendency in times like this to think of Doris Day (she's a few generations back so if you don't know her, Google her) and her song, "Que sera, sera." "Whatever will be, will be." More pessimistic people will throw their hands in the air and think, "It's too late to do anything now so sue me!" I encourage readers to tighten their quality controls now. Don't make a bad situation worse. There is a lot on everyone's plate but make time for improving quality. These suits and the suits still to be filed by actions agencies take next week will be mitigated with better quality control today.
On the brighter side, a lot of normal risks exposures are decreasing so significantly that loss ratios should improve significantly in many lines, excluding claims specific to COVID-19. The frequency decrease is what will decrease losses and with less frequency, the odds of other E&O claims will decrease too. These two opposing forces may cancel each other. A serious possibility exists that 2020 loss ratios will be excellent in many major lines.
If you would like to arrange a short class on E&O mitigation and expectations in this environment, contact me at chris@burand-associates.com.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
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