Since the pandemic struck last March, policyholders have sued insurance carriers nearly 2,000 times alleging their policies covered business losses due to COVID-19 and the related civil authority orders. These claims have primarily focused on business-interruption coverage with policyholders seeking reimbursement for lost income due to pandemic-related mandatory closures orders. COVID-19-related claims have also arisen under event cancellation, directors and officer’s liability and general liability policies. Other types of claims may also be around the corner. For example, employers’ responses to the pandemic increased their vulnerability to cyberattacks resulting in additional exposure to brokers for claims by policyholders who do not have cyber-specific insurance coverage.
While some policyholders have sued their brokers for COVID-19-related coverage gaps, our research suggests there have been few cases. This is not surprising, because policyholders often wait to pursue errors and omissions claims until they exhaust efforts to pursue coverage, and policyholders’ counsel are likely awaiting the outcome of coverage suits before pursuing brokers. If courts continue to find—as they have in most cases—that industry-standard property policies do not cover COVID-19-related losses, policyholders might turn to their brokers and argue for liability flowing from the broker-client relationship. Clients might contend that additional endorsements or coverage forms should have been offered. To the extent that courts conclude that the direct physical loss requirement is satisfied but the claim is excluded due to the presence of a virus exclusion, policyholders might also contend brokers should have provided quotations without the virus exclusions. Finally, to the extent coverage would have been available but brokers did not submit a claim to the insurers, brokers might face claims of negligent claims handling.