Sorry, We Can’t Pay Your Insurance Claim. It Would Cost Us Too Much.

By Dick Hall-Sizemore

For the past 17 years, my wife and I have rented a house at Sandbridge in Virginia Beach for a week in late May. My daughter and her family, including the three grandkids, come down for the week. It is the highlight of our year.

This year was no exception. A year ago, we reserved the week of May 16-23. Then, of course, the coronavirus intervened. The Governor issued an executive order telling everyone to stay at home unless it was absolutely necessary to go out. Stores and restaurants were closed. Would we be able to go to the beach? What about all that money I had already paid (the entire balance due)?

I was not too worried about the money. After all, I had opted for the travel insurance. Then, I decided to read the fine print on the policy and began to get worried.   called the insurance company. I couldn’t get through; the recorded message told me to go to the company’s web page. I sent the company an e-mail asking if my situation was covered under the policy. I got back a boilerplate response telling me how to file a claim. I called the Bureau of Insurance at the SCC. The staff member I talked to was very nice and sympathetic. He told me that, without a copy of the actual policy, he could not tell me for sure whether my situation was covered, but, from what I told him, it probably was not. I sent the insurance company another e-mail, explaining that, under the terms of my policy, “quarantined” was a “covered event” and that the Governor had directed all residents to stay in their homes except under specific circumstances. My simple question:  did this qualify as a covered event? A month later, I am still waiting for an answer.

My situation pales in comparison with that of others. I remember reading in the Times-Dispatch a restaurant owner’s lament about loss of business in the early weeks of the pandemic crisis. He said that without an order closing the restaurant, his business interruption insurance would not cover his losses. He probably got a surprise when he was ordered to close and tried to file a claim with his insurance company.

After the 2002-2003 SARS epidemic, many insurance companies wrote exclusions for viral epidemics into their business-interruption policies. However, even those without such exclusions are refusing to pay damages to businesses that had to close due to the coronoavirus pandemic, including those with “All Risk” coverage. The insurance industry’s position is that, traditionally, business-interruption had to involve physical damage to the property in order to be covered. In addition, it says, assuming liability for all the lost income would bankrupt the insurance industry, despite its $822 billion in cash reserves.  business owners are crying foul. “All risk is All risk”, they contend.

As you would imagine, litigation is breaking out all over. President says that the insurers should pay unless there is a specific exclusion for pandemics. Congress is getting into the act with bills to make insurers pay retroactively, require insurance policies in the future to provide pandemic coverage, and setting up some sort of refinancing program. It is another mess created by the pandemic. Ironically, two years ago, the insurance giant, Marsh, offered a business-interruption policy that included pandemic coverage. It did not sell a single policy. There is a lot of interest in that product now.

As for me, the owners of the Sandbridge house were very accommodating. They allowed us to change our reservation to the last week in August, right before Labor Day. There was no penalty for moving the reservation, although I was faced with a higher rate. Now, I have to worry about whether there will be a resurgence in the virus in late summer and everything gets closed again. If that happens, I hope there will be a hurricane hitting Virginia Beach that week. A hurricane is a “covered event” under my travel insurance policy.

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20 responses to “Sorry, We Can’t Pay Your Insurance Claim. It Would Cost Us Too Much.

  1. Dick, I’m sorry to hear that your vacation was bumped. I hope things work out for August.

    The thing about travel insurance, like any kind of insurance, is that one needs to read the fine print — and who does that? Most people count on their insurance broker to fully inform them. (My wife does read the fine print; I don’t. She’s much better at this sort of thing than I am.))

    I’m sure you remember the flap over insurance after Hurricane Katrina. People thought they had “hurricane” coverage when all they had was coverage for wind damage, not flooding. Who wouldn’t be furious to find out they weren’t covered? But here’s the trick: The insurance carriers were pricing the insurance for wind damage, not wind + flooding. People wanted protection that hadn’t paid for. So, the insurance carriers had a point, too.

    Looking at this from a public policy perspective, the only thing that works is to require full openness and transparency. Insurance carriers and brokers have to be 100% clear about what is included and excluded so people know exactly what they’re buying. That sounds easy in the abstract, but when there are a million different things that could hypothetically happen, it’s probably not so easy to carry out in the real world.

  2. Good article on a subject, we’re going to hear a lot more about and no surprise that the insurance industry has got their bases covered and the folks who buy insurance not only have to be what used to be referred to as Philadelphia lawyers but even then the insurance companies are experts at avoiding risk.

    This is especially one of those areas where the free market caveat emptor outpaces efforts by the govt to level the playing field.

    • Please keep in mind that there is a lot of money in lobbying, and that many times the laws passed to govern such things are heavily influenced by the lobby dollars provided by the industry which is to be regulated, or potentially their competitors. We don’t have a true free market, we have craptialism.

      • re: a true free market.

        should it be without regulations and regulators?

        I don’t see what alternative we have… heck, without the govt,
        people would buy insurance and the insurance companies would just not pay at all.. no?

        • I think there’s a bit of difference between contract enforcement and regulation. Without courts to enforce contracts, there could be no free market, only strong men and those upon who they prey. The government intervening into the free exchange of goods and services between consenting adults is another matter entirely.

          • If the courts have no laws…. then what? We take our form of government for granted. We think there will be laws to protect us but laws are written by men who are influenced by those the laws will affect, i.e. the lobby types …

            anytime one has a “contract” – it’s between the buyer and seller and it means not a whole lot to anyone else unless you have a government and enacted laws that written by those who represent you – the same guys who also represent the other guy!

            Not sure what the distinction is with regard to the government “intervening”…

            “fraud” and “theft” are the government, right? rule of law?

          • matthurt92

            I’m not against the concept of laws, and I am a great proponent of rule of law. All we have to do is look to our neighbors south of the boarder to see the effects of limited rule of law. I don’t think anyone who truly understands the implications of that believes that is ideal. You’ll get no argument from me on this one.

            There are some things into which government should intervene, specifically those things that are expressly outlined in the Constitution. The Framers are now rolling in their graves knowing that the government is dictating how grown ass Americans should interact in their private business dealings. Again, government should intervene in contract disputes, but not what should/should not be in the contract beforehand. That’s for the willing participants to decide and come to agreement before entering into that contract.

            The other thing you mentioned was regulation. Regulations are the bureaucrats’ interpretation of laws. The bureaucrats are not elected, and if you’ve ever had any dealings with the federal government, there’s not a ton of real oversight there. They’re certainly not elected, and they have no real accountability, unless things go really sideways and there’s a big PR issue. Then every elected official (who can reap political benefits) will be out for their head. If it just screws the little man, so what?

            Now, if some folks feel that they are incapable of making their own decisions, and they need big government to intervene in their personal business and make their decisions for them, I’m certainly fine with that being an opt in proposition.

          • Well, in terms of the Constitution and the free market – what are the things in the Constitution that specifically relate to the free market transactions, fraud, etc?

            It’s my impression that different folks with different views interpret the Constitution on issues liks this – in different ways.

            In terms of regulation. Virtually every law has to be further interpreted as to how it applies to specific things.

            For instance, a law might say that roads should have speed limits but that law would never specify all the different kinds of roads and speed limits. That’s left to the regulators.

            If there is a dispute – then the Courts can rule and the lawmakers can also go back and fix something that worked
            different than they intended.

            But virtually every single thing in the US Code in further developed into regulations.

            When they do, they are put out in draft/proposed form form comment – from all parties and then regulations crafted to still follow the law but conform to situations that industry would know about but not the bureaucrats. If there is still disagreement, they can go to court and back to the lawmakers and sometimes EOs are issued.

  3. Our family faced a similar situation. Our reservation is in South Carolina, so a little easier in the situation and we ultimately didn’t have to change our dates. However, yes the fine print in the rental insurance polices get you. You either continue with your proposed dates, change them to another available time or give up your deposit.

  4. Insurance, probably more than any other “product”, is still governed by caveat emptor. You really do get what you pay for, and look up the reputation of the company. Although that is still no guarantee.

    Aetna was selling their “Coastal Virginia” bronze healthcare insurance. None of the network doctors were east of Richmond.

    Back in the 60s, a colleague was taking a flight to Mexico for work. I gave him a dollar and told him to take out a $1M policy and name me beneficiary because I was feeling lucky.

  5. …. oh and you may not get what you THOUGHT you were paying for!

    Life Insurance is where you are betting that you will die and the insurance company is betting you won’t!

    😉

    When the premium cost goes up – you know the insurance company knows something…. 😉

    • I told my life insurance company that I had an idea — if they sent me $50/month then I’ll leave them $500,000 in my Will. They said, “No.” I cancelled my policy.

  6. hmm… you’d think there would be a market product for that, eh?

  7. Glad August might work for you. Sad story about lack of response by insurance groups.

  8. The carrier for our postponed June trip to Europe wouldn’t give me a premium refund, because I merely postponed the trip. When I tried to move the coverage dates to the new October schedule, however, the carrier was demanding a large additional premium. That told me the risk calculation for the fall had really changed….

    We left it with a 100% credit toward a future policy if we book something by early 2021, which I think is fair. They are betting we don’t go even by then, and it may be a smart bet on their part….

    I always shout “read the bill” but they are easier to read than insurance policy fine print….

    • Actually, the only reason you are provided with the actual legal terms is the government. Without the govt, all kinds of bad stuff would happen, – and did – and that’s the reason that government now regulates but the kicker is that most folks don’t read the fine print to start with… or if they do, they really don’t understand it….

      I remember Bacon complaining that his Long Term Care insurance went u on the premiums, like it was a surprise!

      Of all the things where Government meets the free market, insurance is one that is often overlooked. Whether it’s auto insurance or flood insurance or health insurance – it’s all about what the insurer will cover and what they won’t and whether you understand the terms – and what the duty of government is.

      And yet… for most of us … without insurance.. on our car, home and health, we’ be one unfortunate event away from bankruptcy.

      “Insurance” in 3rd world countries is a whole different critter.

      • There’s that SCC again, that agency you sometimes trust and sometimes don’t. But insurance existed as a product long before governments regulated it as they do now, except of course for the courts as enforcers of contracts. Without a written contract it is just you throwing away money.

  9. If you like insurance stories, then read the decision of Judge Kellam on the Discovery America case circa 1996. Here’s’ the wiki
    https://en.m.wikipedia.org/wiki/SS_Central_America
    The Kellam decision, if you can find it, reads like a damn Jack London novel.
    Basically, about 140 insurance companies claimed treasure based on a Lloyd’s of London payout in the mid-1800s.

    I think this is it https://law.justia.com/cases/federal/district-courts/FSupp/742/1327/1688841/

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