A global pandemic is called a ‘clash event’ in insurance, similar to a run on a bank, says lawyer
Among the surge in insurance litigation lawyers expect will follow COVID-19, there will be a host of liability claims, as businesses try to align company policy with government-mandated pandemic protocols, says Jason Mangano, a partner at Blaney McMurtry LLP.
“The profession is likely bracing right now for a surge of claims in connection with how businesses and employers are implementing the COVID protection measures, and I'm not entirely certain that the standard of care in connection with those claims is clear at this point,” says Mangano, who has a hybrid insurance coverage/defence practice.
“I do suspect that the floodgates will open with respect to claims in connection with liability.”
In May, lawyers told Canadian Lawyer that they expect COVID will produce a spike in certain types of insurance claims, leading to a flood of litigation. A pandemic is a “clash event,” affecting a variety of people, across borders, who will make claims against multiple lines of insurance, all at one time, said Eric Knutsen, a Queen’s law professor and insurance law and tort expert.
“I think insurers, generally, are going to be facing the full gamut of potential claims on policies,” said Christine Viney, a Bennett Jones LLP partner in Calgary.
Whether businesses are covered for their claims will depend on a case-specific, contractual analysis, says Mangano. There is little caselaw through which lawyers can predict how these claims will play out, he adds.
“I think the important thing to note is that the outcome of these claims will be based very much on the specific insurance policy language in place between the policyholder and the insurer,” he says.
“Unfortunately, there's very little case law applying those sections to global pandemics,” he says. “I do expect that there will be a significant amount of case law that is generated in the coming years with respect to these nuances and all in these first-party and third-party liability policies.”
Mangano says he will also be monitoring whether the pandemic’s impact births new insurance products. And, as a coverage lawyer, Mangano says he is anticipating decisions that will inform whether liability and first-party policies are engaged by disease claims.
Currently, the bulk of the action in insurance disputes is coming from the services sector, with restaurants “the spearhead” for the tendering of COVID-related business interruption claims, Mangano says.
With business interruption insurance, businesses can recover lost profits if an insurable event causes them to shutter operations. But, as Knutsen told Canadian Lawyer in May, because commercial property policies require a direct physical loss or damage, the key question is whether a pandemic will qualify because it lacks the tangible property damage a fire or flood would leave behind.
And the insurance industry’s response to the pandemic is developing rapidly, says Mangano.
“No doubt, this is a hot topic In insurance right now. And it's still unfolding. Positions are being made almost on a daily basis with respect to whether there is or is not coverage under these policies.”
Mangano will be speaking at the upcoming Canadian Lawyer Webinar: Insurance disputes and litigation – A look at the COVI-19 fallout, which will take place July 9, at 12 pm EST.