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April/2020 | Published by: SERGIO RUY BARROSO DE MELLO

Insurance coverage in times of pandemic

It is a very sensitive topic, in all aspects, the examination of coverage in the insurance contract for claims arising from the pandemic caused by COVID-19. The first point to note is that the risks of epidemics and pandemics are traditionally excluded from any insurance contract, whether it be people, property or even liability. And this is because technically and actuarially, the determination of the appropriate premium encounters gigantic obstacles, as the severity is high and the range of proportions is overwhelming. The Insurance Sector, however, has shown strong resilience, made enormous efforts to understand this unknown risk and acted with profound sensitivity in dealing with the matter, so much so that some Insurers are suspending automatic coverage cancellations due to non-payment of premium, as well as extending the payment terms of those in installments, just to financially relieve its Insured.


The question to be examined, for the purpose of insurance coverage, is whether the accident resulting from the pandemic caused by COVID-19, under the terms of the insurance and reinsurance contract, is strictly foreseen and guaranteed.


Whoever works in the Insurance Sector knows how painful it is for the Insured and for the Insurer to refuse to cover a claim, after all, the one who takes out insurance seeks exactly comfort at the time of misfortune. Not to mention the enormous damage to the image of the insurance company, which invests so much in advertising and publicity.


However, when investigating the technical coverage, it will be necessary to consider several other very significant details in the context of Brazilian law, as the legal uncertainty extracted from the practice of the Courts is currently very relevant. In this sense, it would not be too much to remember that if an eventual claim of this nature, denied by the Insurer, is understood to be well founded by the Judiciary, there would be plenty of lawyers to defend the Insured’s claim to receive funds as lost profits, emerging damages, among others. others, which go far beyond the maximum indemnifiable limits of policies. Whether or not the Judiciary will grant such claims, only time will tell, but it is essential for the Insurer that it does not have reinsurance, or has not contracted the extra contractual funds (ECO) clause in its reinsurance contract, think hard before deciding, otherwise, if defeated in court, he would be obliged to use equity to pay such legal indemnities higher than the policy LMI. It would be an economic shame capable of jeopardizing the insurance company’s own operation.


What has been noticed in these first weeks of the pandemic is the vertiginous increase of consultations by the Brokers / Insured to the Insurers regarding the extension of coverage, in addition to advance requests for the extension of those coverage still in force, leading, inevitably and obligatorily, to consultations. to Reinsurers, which is highly recommended, because otherwise, there will be mismatch between insurance and reinsurance, with catastrophic economic consequences for the Insurer’s own capital and its shareholders. The Reinsurer is a great and fundamental partner in the Insurers’ business, its “currency”, in the face of a claim, is called “information”, the more transparent the Reinsurer is, the easier its relationship with the Reinsurer will be.


The claims of claims submitted under the pandemic of COVID-19 are the most diverse: indemnities in the insurance of people for death; civil liability of doctors and hospitals for contamination of patients, employees and third parties; expenses incurred for altering and securing business operations under the caption “rescue and containment” (transportation costs; overtime; overtime measures; decontamination expenses, among others). But the truth is that, if the clause covers a pandemic, it will be necessary to understand whether such expenses would be even in the context of the avoidability of the imminent risk and the attempt to contain it. Those expenses about which there are doubts as to their effectiveness in preventing the accident, cannot be considered as covered by the insurance contract.


It is worth noting that it is underway in the Federal Senate, in an extremely urgent character, so much so that it may be approved even before the publication of these notes, the Bill 890/2020, authored by Senator Randolfe Rodrigues (REDE / AP), whose purpose is purpose of amending article 798, of the Civil Code, to include in the life insurance coverage deaths resulting from epidemics or pandemics, even if declared by competent authorities. It would be an intervention in the scope of highly dangerous private relations, capable of compromising the very constitutional freedom of the manifestation of the contractual will, in addition to making technically unfeasible the acceptance of this type of risk, due to the enormous difficulty in calculating the premium, as above mentioned at the beginning of these lines, which already go beyond the programmed.


Anyway, sensitivity arises at this moment, from all angles, however, and the role of the insurance lawyer is to face moments of misfortune with serenity and thus seek the best and most balanced legal solutions.


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