When I wrote about emerging issues facing the property/casualty insurance industry for Carrier Management early in 2020 I stated, “Insurers and reinsurers face numerous emerging issues arising from: the rapid pace of scientific, technological and medical advances; new products; changing social mores; court decisions abrogating various insurance policy defenses; as well as new and amended laws and regulations.”
Executive SummaryFollowing up on an exclusive article that he wrote for Carrier Management earlier this year, veteran risk watcher Charlie Kingdollar reviews risks that came to light in the subsequent months—risks created by the pandemic and by violence, and the risks of blue light emanating from all the devices we have been staring at as we hunkered down.
While estimates vary, the industry is keeping track of COVID costs, but tallies of insurer defense and indemnity costs for mass shootings and workplace violence cases remain unknown.
As for blue light risks, litigation related to health issues could be a decade away, but the numbers of potential plaintiffs’ and corporate defendants suggest it’s an issue worth watching, Kingdollar writes.
It may not have been clear, but that list of circumstances that gives rise to emerging issues was not all-inclusive. The year 2020 has highlighted additional circumstances that also give rise to emerging issues. (See Related article: GOT Issues: An Update)
Emerging Issue: Pandemic
Unfortunately, there is no shortage of emerging issues facing P/C insurers and reinsurers. As I write this, the president of the United States was just released from the hospital after being treated for COVID-19. As of Nov. 30, there have been over 268,000 COVID deaths in the U.S., and the country is still seeing over 48,000 new coronavirus cases and over 1,000 deaths daily, according to data from John Hopkins University and the CDC. The pandemic has resulted in states, counties, cities and towns across the U.S. implementing, to various extents, measures to slow the spread of the virus. These measures have included personal recommendations like social distancing and mask wearing but also the partial or total closings of schools, businesses and other places where large crowds could gather.
By the end of November, these orders to close down businesses had resulted in nearly 1,300 lawsuits filed by businesses against property carriers, according to the Penn Law COVID Coverage Litigation Tracker. So far, courts in several jurisdictions have ruled on motions to dismiss business interruption coverage actions. As of the beginning of October, insurers had prevailed in 17 out of 23 of the motions to dismiss, with many judges deciding that some level of physical alteration is required for coverage. Courts hearing six of these coverage actions, in four jurisdictions, have allowed the cases to move forward—three in Missouri and one each in Florida, New Jersey and Pennsylvania.
Some are predicting that because state law precedents vary significantly state by state, more policyholders will prevail as additional jurisdictions hear these business interruption coverage actions, thus creating a patchwork of decisions across the country.
As of Nov. 20, 2020, insurers and reinsurers globally reported COVID losses, estimated losses and IBNR of $28.1 billion. Lloyd’s has estimated that COVID commercial insurance losses could be as high as $107 billion in 2020. Analysts at the investment bank Berenberg have estimated total COVID claims of between $50 billion and $70 billion. These estimates include losses due to travel and event cancellations.
Clearly, these are early estimates that will likely increase as the effects of the pandemic will also be felt in the fourth quarter and into next year. For some context, asbestos losses in North America are expected to cost the P/C insurance industry $100 billion ($120 billion globally); U.S. pollution losses, $47 billion.
One wonders how much of these early estimates are attributed to third-party liability litigation filed in the U.S. As of early October 2020, personal injury lawsuits have been filed against nursing homes, hospitals, meatpackers, restaurants, grocery stores and warehousing operations. The list of potential defendants will likely grow as the pandemic continues. This litigation could impact general liability and commercial umbrella policies as well as medical and hospital professional liability policies.
It is also unclear as to whether these estimates include the potential for take-home COVID claims. According to an Oct. 2 article in Risk Management Monitor, “Praedicat modelers estimate that 7-9 percent of COVID-19 deaths in the first [COVID] wave have been family members of workers in essential industries who acquired coronavirus at work. With widespread testing and improved contact tracing, take-home transmission could be relatively easy to demonstrate during a second wave. The first take-home COVID-19 lawsuits were filed in August against an electrical supply company and a meatpacking facility, and the precursors to these complaints are present in earlier lawsuits filed against Amazon and McDonald’s,” the article said.Separately, in an article they wrote for Carrier Management in July, Praedicat executives estimated that take-home COVID losses could exceed $50 billion for a catastrophic scenario involving a fall and winter second wave of COVID-19 cases—one in which the ultimate size of the pandemic in the United States rose to 300,000 deaths. More recently, the analysts updated the figure to $21.2 billion for the same 300,000-death scenario. (Recall, U.S. deaths are over 268,000 at this writing.)
How will the ongoing U.S. trend of social inflation of bodily injury verdicts and settlements impact COVID third-party litigation? How was this considered in these early COVID claims estimates?
Additionally, COVID-19 will affect workers compensation as several states have granted various workers a rebuttable presumption for COVID-19 illnesses under their workers compensation systems. The pandemic will also likely result in litigation filed by shareholders impacting directors and officers coverage as well as wrongful termination litigation filed by former employees terminated for reporting COVID safety violations in the workplace.
It would seem these early loss estimates may have nowhere to go but up.
Unfortunately, the pandemic is only one emerging issue the P/C insurance industry is currently dealing with.
Emerging Issue: Violence
Compared to other first-world countries, the United States has a violence problem.
The P/C insurance industry tends to chop up coverage for violence into different buckets. At first, I was just going to discuss the recent U.S. racial injustice protests—some of which had turned violent—leading to vandalism and arson, which could be covered under the riot and civil commotion coverage section of property policies. But these protests were ignited by actions taken by police officers that resulted in the deaths of often unarmed civilians—which could be covered under police professional, a.k.a., law enforcement legal liability policies. So, already there were two lines of business impacted.
But these are very tumultuous times in the U.S. Mass shootings and acts of workplace violence also can result in litigation and claims. It’s doubtful that the P/C industry tracks the costs of “violence” and its combined impact on the industry. But “violence” clearly is a costly issue for insurers and reinsurers.
The recent civil unrest may result in the biggest payout, to date, by the industry under riot and civil commotion coverage. Property Claim Services Inc., a unit of data analytics firm Verisk Analytics Inc., based in Jersey City, N.J., designated the civil disorder from May 26 to June 8 as a multi-state catastrophe event. PCS and the Insurance Information Institute also said that the cat event would likely surpass the Los Angeles riots of 1992, which caused $775 million in insured losses, or $1.4 billion in 2020 dollars. Some cities have seen additional or ongoing protests that have also resulted in some vandalism since June 8, and such protests are likely to continue when future incidents of racial injustice occur. Hopefully, these protests will be peaceful, but insurers may yet see additional claims seeking coverage under riots and civil commotion provisions.
But riots and civil commotion aren’t the only acts of violence impacting insurers and reinsurers. The U.S. has a mass shooting problem. We can’t even settle on a definition of a “mass shooting.”
The Congressional Research Service defines mass shootings as multiple firearm-related homicide incidents, involving four or more victims at one or more locations close to one another. The FBI definition is essentially the same. Often there is a distinction made between private and public mass shootings (e.g., a school, place of worship or a business establishment). Mass shootings undertaken by foreign terrorists are not included, “no matter how many people die or where the shooting occurs,” according to an article on the University of Pennsylvania Department of Criminology website. (“What is a Mass Shooting? What Can Be Done?” by Professor Richard Berk)
The crime and violence research group Gun Violence Archive defines “mass shooting” as having “a minimum of four victims shot, either injured or killed, not including any shooter…” Still other organizations that track mass shootings define it as having three or more rather than four or more homicide victims.
According to the Gun Violence Archive, there were:
- 269 mass shootings in 2014.
- 335 in 2015.
- 382 in 2016.
- 346 in 2017.
- 337 in 2018.
- 417 in 2019.
Mass shooting incidents can lead to significant litigation. Potential defendants can include:
- Owners and operators of businesses or facilities where the shooting occurs.
- Event promoters.
- Security firms.
- Law enforcement.
- Parents/relatives of the shooter.
- Mental health providers.
- Retailers or gun shops where the assailant acquired weapons (if acquired illegally).
- Straw purchasers.
- Organizations that fail to report disqualifying information to authorities.
- Anyone in a position to know of or intervene in the shooter’s plan.
As you can see in the list above, in cases where the parents of a shooter are named defendants, mass shootings can also impact personal lines.
In many jurisdictions, business owners are not liable for injuries caused by the criminal acts of a third party unless the criminal act was foreseeable. Historically, courts have found the actions of mass shooters to be “so unexpected and remote that, as a matter of law, no rational juror could find that a business owner should have foreseen them,” according to an article on the American Bar Association website. This also largely held true for acts of workplace violence. Given, however, the uptake in frequency of both mass shootings and workplace violence, could this be changing?
Take, for instance, the deadliest mass shooting in the U.S., which occurred in Las Vegas on Oct. 1, 2017. Fifty-eight people were killed and more than 850 injured at an open-air concert near the Mandalay Bay resort. A settlement has been approved by the district court totaling $800 million from casino company MGM Resorts International and its insurers to more than 4,400 relatives and victims of the mass shooting. Authorities said more than 22,000 people were attending an outdoor music festival when a gunman firing military-style weapons from windows on the 32nd floor of the Mandalay Bay rained rapid-fire bullets into the crowd…MGM Resorts, owner of the hotel and the concert venue, acknowledged no liability. It will pay $49 million, while its insurance companies will pay $751 million,” an October AP report said. This does not include three years of defense costs incurred.
Mass shootings, as terrible as they are, do not always result in such a large insurance payout. The shooting at the Marjory Stoneman Douglas High School in Florida killed 17 people and wounded 17 more on Feb. 14, 2018. Many more at the school were traumatized. The Florida Supreme Court recently sided with the Broward School Board, determining the shooting was a single incident and that the district’s liability should be capped at $300,000 to be divided among all the victims.
Also keep in mind that the insurers see claims for incidents that don’t rise to any of the definitions of “mass shooting.” Incidents where two are killed and several wounded are not technically “mass shootings,” but can certainly result in costly defense and indemnity costs. These shooting incidents would be added to the total costs of mass shootings should the industry ever become curious about the total impact of violence on the U.S. P/C insurers and reinsurers.
Workplace violence is yet another source of industry claims.
According to the Occupational Safety and Health Administration, “Workplace violence is any act or threat of physical violence, harassment, intimidation, or other threatening disruptive behavior that occurs at the work site. It ranges from threats and verbal abuse to physical assaults and even homicide. It can affect and involve employees, clients, customers and visitors.” Acts of violence and other injuries is currently the third-leading cause of fatal occupational injuries in the United States. According to the National Safety Council, in 2018, assaults resulted in 20,790 injuries and workplace assaults resulted in 453 fatalities. Workplace assaults have steadily increased since 2011.
Is the P/C insurance industry tracking the defense and indemnity costs of workplace violence?
I have not found an estimate.
There may be little interest in having the industry track defense and indemnity payments paid out across various lines of business as a result of violence. It may be just too impractical and may raise too many questions: Would/should incidents of road rage be included? They are certainly acts of violence, and they have resulted in bodily injury and property damage.
The insurance industry is clearly tracking the costs of riot and civil commotion but may not be tracking the costs of other acts of violence. This may change as, unfortunately, there is little indication that overall violence in the U.S. is on much of a downward trend.
Emerging Issue: Blue Light
Full disclosure: This is really very early times to discuss the possibility for adverse health effects arising from exposure to blue light emanating from electronic devices, such as televisions, computers, tablets, smartphones, gaming systems. But given how pervasive these devices are and the fact that many frequently use multiple devices throughout the day for work, pleasure, education, etc., I thought the topic may be of some interest.
Recent studies have begun to highlight the potential adverse health effects caused by exposure to blue light. Recent findings include:
- A study by researchers at the Barcelona Institute for Global Health found that overexposure to mobile phone screens late at night can raise the risk of bowel cancer by as much as 60 percent. According to an article published in The Telegraph, some of the same researchers “previously linked blue light exposure at night with an increased chance of being diagnosed with breast and prostate cancer.”
- Blue light exposure can affect sleep and potentially cause disease. Research shows that it may contribute to the causation of cancer, diabetes, heart disease, and obesity. While light of any kind can suppress melatonin, blue light at night does so more powerfully. Harvard researchers compared the effects of 6.5 hours of exposure to blue light to exposure to green light of comparable brightness. The blue light suppressed melatonin for about twice as long as the green light and shifted circadian rhythms by twice as much (3 hours vs. 1.5 hours).
- According to an article by U.C. Davis Health, “continued exposure to blue light over time could damage retinal cells and cause vision problems such as age-related macular degeneration. It can also contribute to cataracts, eye cancer and growths on the clear covering over the white part of the eye. According to a study funded by the National Eye Institute, children are more vulnerable than adults because their eyes absorb more blue light from digital devices.
Again, it’s very early in the developmental emerging issues timeline. It may take a decade or more before there is any litigation, but it’s worth monitoring given the serious ailments early studies are linking to exposure, a huge potential plaintiffs’ pool, many perceived deep-pocket corporate defendants and retailers, and the potential for limits stacking of occurrence-based policies over policy years.
The P/C insurance industry faces a plethora of other emerging issues: exposure to nanomaterials, traumatic brain injuries/concussions, pesticide and herbicide exposure, PFAS exposure, exposure to BPA and its substitutes, the changes brought forth by the onset of the 4th industrial revolution (i.e., the adoption of artificial intelligence and robotics), cyber attacks capable of causing bodily injury and actual physical damage—to name just a few.