Long tail, fat tail, whatever it is it is a huge risk for insurers and reinsurers.
Their problem is they didn't price their BI policies to cover forced lockdowns and the clauses are hazy enough that courts can go either way on whether the insurers have a contractual liability.
From Reinsurance News, June 14:
UK pub group Stonegate is suing insurers MS Amlin, Zurich Insurance and Liberty Mutual for £1 billion in a new major COVID business interruption (BI) case.
Reuters, which first covered the story, speculates that the Stonegate case, if successful, could provide momentum for a second wave of pandemic claims against insurers.
The UK’s original BI test case concluded in January 2021, after the Supreme Court uphold an earlier ruling that sided with policyholders on a number of key issues.
This was ultimately seen to cost billions for re/insurers, harm their reputations and impact premium prices, and analysts warn that more of the same could be expected if others choose to follow Stonegate’s lead.....
....MUCH MORE
And July 19:
Reinstatement of COVID BI case has potential to set a ‘worrying precedent’
The recent ruling by a California court of appeal to reverse a lower court’s dismissal and reinstate a COVID-19 related business interruption (BI) lawsuit filed against a division of global insurer Allianz, has the potential to set a “worrying precedent”, according to analysts at Jefferies.
Last week, Division Seven of California’s Second District Court of Appeal allowed, by unanimous decision, a COVID-19 BI dispute to go forward.
In a rare victory for policyholders, the first of its kind ruling in the California appellate courts, reversed the trial court’s ruling that COVID-19 cannot, as a matter of law, cause direct physical loss or damage sufficient to trigger BI coverage under a commercial property policy.
As a reminder, the plaintiff (owners of Hotel Erwin and Larry’s restaurant) notified their insurer, Fireman’s Fund Insurance Company, which is part of Allianz, of their COVID-19 related losses, but were denied coverage, which led to the insurer being sued in July 2020 for breach of coverage....
....MUCH MORE
As the article says, the insurers thought the issue of liability was decided in their favor over the last two years but things are happening that could seriously disrupt that view.
