By Richard Gabriel, Jonathan Ross and Gabriela Cedré

Law360 (September 3, 2020, 5:40 PM EDT )

Richard Gabriel

Jonathan Ross

Gabriela Cedré

The COVID-19 crisis and its subsequent effects on business operations across the country pose a unique set of challenges to both the insurance industry and insureds filing these claims.

Already, at least 700 lawsuits have been filed[1] against many major insurers for denying claims or failing to pay for lost revenue from business interruption losses, and it is expected that many more will come as the pandemic continues.

While a number of courts have already sided with insurers in interpreting that the coronavirus did not constitute a direct physical loss, the path forward for both sides is complicated, should these claims make it to trial.

In May, we conducted a national online survey of jury-qualified U.S. citizens to analyze the public's experiences and opinions about insurance and business interruption policy provisions in the wake of the COVID-19 pandemic.

Each respondent answered questions about their general attitudes toward the insurance industry, their personal experiences with insurance companies and filing claims, their specific opinions regarding business interruption claims filed due to the coronavirus outbreak, and the personal impact the COVID-19 pandemic has had on their lives.

The goal of the survey was to gather data to understand how the public and potential jurors would respond to key coverage issues in these lawsuits so that plaintiffs, defendants, companies and insurers could prepare for upcoming legislation, regulatory actions and litigation. The following results and analysis highlight potential strengths and risks that insureds and insurers should consider in their upcoming litigation.

General Attitudes About the Insurance Industry





Overall, survey respondents had mainly positive views of insurance companies. Only 12.4% of participants indicated that they had somewhat negative or very negative opinions of insurance companies, compared to 51.1% who were somewhat positive or very positive. The remaining 36.5% of respondents were neutral.

Nearly three-quarters of participants thought insurance companies were either very or somewhat fair in handling insurance claims. The same pattern emerged when respondents were specifically asked about how fairly they expected insurance companies to handle COVID-19-related claims.

These positive attitudes toward the insurance industry suggest that most potential jurors will not be entering a courtroom with an automatic dislike or distrust of insurance companies. However, as you will see, these positive attitudes can also translate into high expectations for how insurers handle claims arising out of the pandemic.

Personal Experiences With Business Insurance



Personal life experience greatly affects how jurors interpret the evidence and legal issues in a case. More than 60% of respondents have themselves or had a family member that currently own or owned a business in the past. This illustrates how the much of the public has some personal business experience, either directly or through the experiences of friends and family, and how those experiences can affect their expectations and attitudes toward business claims.

Despite the breadth of experience with business, only 13.8% of respondents had ever filed an insurance claim for a business loss. Regarding claims related to the COVID-19 pandemic, about 18% of participants have filed or plan to file a business insurance claim. Of those respondents who have filed or plan to file a claim, nearly 59% expect their claim to be completely covered, 36% believe they will be partially covered, and only 5% expect their claim to be denied.

For plaintiffs and defendants, it will be important in jury selection to understand the positive or negative experience of potential jurors who have had prior business claims. Despite their generally positive attitude toward insurance companies, nearly 40% of the survey respondents indicated they had been treated unfairly by insurers.

Underscoring a concern that both plaintiffs and defendants have in litigating insurance coverage disputes and in clarifying policy provisions, more than two-thirds of our respondents stated they only understood some or little of what their insurance policies did or did not cover.

Business Interruption Insurance and COVID-19

To assist respondents who might not be familiar with business insurance policies, we provided some brief, neutral explanation about business interruption insurance in the survey before asking participants their opinions about it, including the following:

• Most business insurance policies contain language that specify they only cover business interruptions that are caused by direct physical loss or damage to the property.
  
  
• There are likely to be insurance claims by businesses under their business property policies asking their insurance companies to cover revenue that was lost during the COVID-19 pandemic.

Foreshadowing a key concern for insurers on a central topic in business interruption claims, approximately two-thirds of participants considered the reduced operation or nonoperation of a business as a result of the COVID-19 pandemic to be a direct physical loss. However, responses were more mixed when asked if they believed insurance companies should cover these COVID-19 claims filed under a business's  general property policy.

While a slight majority of respondents were not sure if businesses' general property insurance should cover coronavirus-related losses, 42.1% believe that it should. Slightly less than 10% believed COVID-19 claims should not be covered. This finding cautions insurers to thoroughly question jurors in voir dire about any preconceived beliefs about whether COVID-19 business claims should be covered, thus shifting the burden to insurers to prove why they are not.





On March 23, there were only nine states with mandatory stay-at-home orders. One week later, that number was at 30 states. As of April 20, there were 42 states with mandatory stay-at-home orders, three with partial state orders and only five states with no orders in place.[2]

When given two scenarios regarding stay-at-home orders and their effect on business operations — the civil authority provision in many policies — over half of the respondents (58.5%) think a business should be able to recover money from business interruption insurance even if the business can still operate in a modified way.

The coronavirus has significantly interrupted the global and national supply chain. As a result, some businesses have made business interruption claims because of their inability to get needed supplies to run their business.

To understand this issue, we gave respondents scenarios concerning income loss due to limited resources needed to continue regular business operations — the contingent business income loss in policies. Even more participants (71.4%) believed that those businesses should be able to recover any loss of income from their business interruption insurance instead of having to change and adapt their business operations to continue business operations.

When asked about which losses should be covered, 46% of respondents believed that insurance companies should fully reimburse businesses for all lost profits and revenue that occurred during the pandemic.

However, underlining a concern for plaintiffs in these cases, 41% of participants believed that insurance companies should only be required to pay for businesses to fully clean and sanitize their physical locations, and should not have to pay for lost income. Only 13% of respondents thought that the insurance companies should not have to pay the claim because COVID-19 does not cause physical damage or loss.



Illustrating how some of these complex insurance policy and coverage issues intuitively favor plaintiffs, about half of our sample believed that insurance companies should be obligated to cover all financial losses suffered by their insured businesses during the COVID-19 pandemic — regardless of what is written in the policy.

This demonstrates that jurors may require more than policy interpretations and reliance on the law to convince them that an insurer acted in good faith in denying or only partially paying a business interruption claim.

Personal Impact of COVID-19



Lastly, we asked participants if and how they had been affected by the coronavirus outbreak. Unsurprisingly, most respondents have been personally impacted by the pandemic with only about 22% indicating they have not been affected at all.

Of those respondents who have been personally impacted by COVID-19, about two-thirds had been financially impacted, having lost or reduced income. Nearly a third reported being emotionally affected by the pandemic, meaning that they know someone who has contracted or has died from the virus, and only 4.2% have contracted the virus themselves.

Impact Analysis on Survey Results

We created two separate groups of respondents in order to analyze whether the personal impact of COVID-19 had an effect on the way people responded to the survey.

The high-impact group is comprised of participants who indicated they have been hugely or moderately affected by the pandemic. The low-impact group consists of participants who indicated they have not been affected by the pandemic or have only been slightly affected.

Separating respondents into these two groups nearly split them down the middle with about 53% in the high-impact group and 47% in the low-impact group. The results show that the more a respondent is impacted by COVID-19, the more they would favor plaintiffs in a dispute with an insurer over business interruption losses.



The low-impact group were significantly more likely to believe that businesses' general property insurance should not cover revenue that was lost during the COVID-19 pandemic. Even though a small percentage of overall respondents believed this (9.6%), 62.3% of those participants were in the low-impact group.

Likewise, those in the high-impact group were significantly more likely to believe that lost revenue caused by the pandemic should be covered by businesses' general property insurance. Of those respondents who believed general property insurance should cover the lost revenue, 59.2% were in the high-impact group.

Results also illustrated that high-impact participants were significantly more likely to think that insurance companies should be obligated to cover all financial losses suffered by businesses during the pandemic, regardless of what is actually written in their policy. Of the all the respondents who believed that, 57.2% were in the high-impact group.

Similarly, low-impact respondents were more likely to believe that insurance companies should not be obligated to cover all of these losses, with 52.3% of all participants who believe this falling into the low-impact group.

Conclusions

Overall, this survey shows contrasting results that need to be carefully evaluated when trying cases involving these issues. Respondents have relatively positive views of insurance companies, but a large percentage (almost 40%) have themselves or have had someone close to them been treated unfairly by insurers.

Less than 30% of respondents fully understand their insurance coverage, and, as a result, resort to interpretations about what they feel the policy should cover. As a result, many are willing to interpret direct physical loss provisions or to ignore policy language altogether if it means helping businesses obtain coverage during this unprecedented time.

However, this survey also indicates that respondents were somewhat receptive to an insurance company providing mitigation coverage rather than full reimbursement for lost revenue. Additionally, this survey also demonstrates that people who have not been personally impacted, or have been only mildly impacted, by the coronavirus outbreak are more likely to be receptive to insurance company positions compared to those who have been highly affected by the pandemic.

In conclusion, both plaintiffs and defendants in these business interruption cases are cautioned to take great care in how they educate jurors and judges about the relevant legal or underwriting issues, how they prepare witnesses to testify about policy provisions and contract interpretation, and how to present their cases to meet the reasonableness standard in the claims handling process.

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Richard Gabriel is president of Decision Analysis Inc., co-author of the practice guide "Jury Selection: Strategy and Science" (Clark Boardman Callaghan), and the founder of the Online Courtroom Project.

Jonathan Ross is a senior consultant at Decision Analysis.

Gabriela Cedré is an associate consultant at the firm.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://www.insurancejournal.com/news/national/2020/08/03/577444.htm.

[2] https://www.nytimes.com/interactive/2020/us/coronavirus-stay-at-home-order.html.

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