In this exclusive expert video briefing from the IMS COVID-19 Research Insights Series, we speak with Commercial Insurance Industry Expert, Ty Sagalow, about insurance products and virus protection clauses as they relate to COVID-19.

Chris Ritter: Hello, Ty. It's good to see you.

Ty Sagalow: Good to see you, Chris.

Ritter: I hope you're well. I hope your family's well and you're staying productive during this very strange time we're in.

Sagalow: I am. And you too.

Ritter: Yeah. Thank you. Ty, you've been doing insurance work for a good long time, I think probably close to forty years. And I know you have gone through a lot of what would be considered the prior disasters, hurricanes and earthquakes and fires and 9/11 and all that other stuff that have kept us on our toes over the last few years. But this is a unique situation and I guess I'd like to talk with you about what you see are some of the issues as a result of the COVID-19 epidemic and all of the things that it's had and the effects that it's had on our lives.

Ritter: So, when you're talking about this other coverage that was available, there were actually policies out there that would have covered situations that specifically have been occurring, business interruption as a result of a virus?

Sagalow: Absolutely. So, Chris, you know a little bit about my background, right? So, I was the chief innovation officer, president at product development at AIG. At AIG in 2013 we started developing a product for SARS. I forget whether we launched it or not, but other people launched it. There were people who bought it. Wilmington, for example, bought it, if I remember correctly, since 2003. They actually put in a claim in COVID. They're actually getting paid a tremendous amount of money for canceling and there were many other companies that have successfully bought this exact type of coverage.

Sagalow: I was also involved in a number of Insure Tech companies that attempted to sell this coverage. Munich is not an Insure Tech company but Munich is an insurer that offers this coverage today. I'm involved in an advisory board of a company called Metabiota that helps Munich resell this coverage today. There are a number of people that were offered this coverage that said no. When I say people, I mean companies that said no that are now regretting that decision and now buying it. So, it has been available for seventeen years. Not a lot of people bought it but that doesn't mean it wasn't available. And some people did buy. Brokers are going to face that reality as well.

Ritter: It'll be interesting. You're going to have one side saying, "Why didn't you tell me so I could have bought it," and the other side saying, "Why didn't you tell me you needed it so I could have sold it to you?"

Sagalow: That's exactly going to be the argument.

Ritter: All right. Well, it'll be interesting to see how that plays out. And dare I ask, does that raise potential insurance issues with respect to the brokers and the agents themselves? Are we starting to get into a mirror within a mirror image where the issues just continue to multiply on an insurance basis?

Sagalow: I think so. One of the problems that are going to happen in both the broker ENO area as well as the DNO area is when these professionals are looking for additional limits, for example, and they have to give warranties. For those in the audience that may not know, a warranty statement — which is standard when you are asking for additional coverage in the marketplace — says that I, the insured, or I, the applicant, do not know of any act, error, or omission that could give rise to a claim made against me.

Sagalow: How is the insurer going to react if the applicant says, "No, I don't." And then a claim comes in like the ones that we're just talking about, whether a claim made against a director and officer, the ones I just mentioned, or a claim made against the professional broker, like the one I just mentioned. Is the carrier going to say, "You just asked for additional coverage," and a few months later or even a year or two later, you got this COVID-19 related claim. Seems to me that you probably knew it was coming. So, I see a lot of arguments on coverage issues arising out of warranty letters to be sure.

Ritter: Well, your answers are proving that you're absolutely correct. There are lots of different kinds of claims out there and it's going to be difficult for us to even anticipate all of them. One you mentioned but we haven't really talked a lot about, which is run of the mill general liability type claims, the kinds of claims that you might get with respect to brought by employees. How do you see that developing? How do you see those kinds of policies coming into play?

Sagalow: So that's also fascinating because let's say the scenario of you're now going back to work but you're afraid to go back to work because there's no vaccine, the virus is still out there, but your employer says, "Everybody come back." The governor has now said we're on phase two or phase three or whatever it is and if you don't go back to work, you're fired. So, you go back to work and you get the virus, or you just get nervous and you get emotional about it. Right? Is that worker's comp, first of all? What type of employer liability? Is that creating a hostile work environment?

Sagalow: Now. The legislature is trying to pass immunity laws to make it even worse. What are the limitations of those immunity laws if they are passed? How are those immunity laws interpreted? How does this affect worker's compensation? Again, a total absolute mess. The only people that are going to be happy are the lawyers.