COVID-related insurance claims were a key focus of the second quarter report filed by The Travelers Companies, Inc. with the U.S. Securities & Exchange Commission on July 23. According to the report, Travelers panel counsel members have probably seen an increase in early COVID-related claims in the following areas:
- Hospital workers collecting workers’ compensation benefits
- Sporting event cancellation coverage
- Restaurants filing business interruption claims
Work-from-home orders following COVID lock downs across the country also helped Travelers save money when certain types of claims decreased. Of course, this also means fewer claim files for Travelers panel counsel members.
- Auto accidents declined as fewer workers drove to work
- Home-based workers filed fewer workers’ compensation claims
- Restaurants filed fewer slip-and-fall claims as diners picked up food curbside
Travelers gave auto policyholders refunds valued at about 15% of annual premiums. Future rebates of this nature are not expected, although the carrier may make pricing adjustments.
Gross claims and claim adjustment expense reserves at June 30, 2020 increased from December 31, 2019, due in part to reduced claim settlement activity largely caused by COVID-19 judicial system disruptions. Travelers panel counsel across the country have certainly been struggling with closed courthouses, telephonic hearings, cancelled jury trials, and an overall slowdown in court procedures.
Management liability expenses in the Bond & Specialty Insurance division rose due to higher loss estimates for associated claims.
COVID-19 is certain to impact future operating results according to Travelers, but the carrier concedes that it is essentially impossible to predict the “scope, duration and magnitude of the direct and indirect effects of COVID-19.”
Workers’ Compensation Claims
Travelers reports an increase in the frequency and severity of workers’ compensation claims. Part of this is due to claims where workers exposed to COVID-19 can demonstrate that the injury or illness resulted from their employment.
A contributing factor is that several states have enacted changes designed to expand workers’ compensation coverage by creating a presumption of compensability for certain types of workers impacted by COVID-19. This could include hospital professionals, transportation workers, and first responders.
COVID workers who are concerned about the safety of medical care may take personal care actions that could actually delay or extend treatment, thereby increasing claim costs according to Travelers.
COVID Claims by the Plaintiffs’ Bar
Plaintiffs’ lawyers seeking to file COVID-19-related claims against Traveler’s insureds could result in increased claim volume and severity, notes Travelers.
Frequency and severity could also increase with respect to auto and property coverages due to, among other things, disruptions in supply chains and changes in business practices and individual behaviors resulting from the stay-at-home and social distancing measures.
Travelers identifies the following types of risk factors resulting from COVID-19 in auto and commercial property lines:
- Collisions at faster speeds
- Delayed reporting and settlement of claims due to limited access to business locations
- Elevated fire, water and crime claims at unoccupied/closed businesses
- Higher first party medical losses in some areas
- Increased exposure in industries with delivery services
- Reduced repair shop and/or parts availability
Liability exposures in other lines of coverage include:
- Commercial surety lines bankruptcies among insureds, particularly in the transportation and energy industries
- Construction surety losses if contractors experience shutdowns, cash flows disruptions, supply chain disruptions, unavailability of labor, or increased materials costs
- Directors’ and officers’ (D&O) liability insurance claims related to alleged mismanagement or other failures
- Employment practices liability insurance (EPLI) claims related to furloughs and lay-offs of employees
- Securities class action cases
Travelers panel counsel members are likely to see these types of claims, along with the uncertainty mentioned in the Travelers report, in future incoming files.
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This article is provided for educational purposes only. It is not to be interpreted as legal advice or an opinion in regard to any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.