By: Chris Boggs | Big I Virtual University Executive Director

This article was originally published in our September 2020 Wisconsin Independent Agent. Read more from our September issue here. 

Thousands of restaurants engage in food delivery. This is, by no means, a new phenomenon. With that reality in mind, two questions arise:

1. Is the restaurant covered for food delivery if it does NOT have a business auto policy; and

2. How does a restaurant’s business auto policy respond to food delivery when they have the  coverage?

What appears to be two simple questions simply aren’t.

The simple answer is, yes, the restaurant is covered for its auto liability exposure – well, maybe there is coverage. The more  complicated answer is, yes, the restaurant is covered, but is that coverage adequate for the restaurant and the employee?

Let’s begin by looking at the reality of coverage when the employee is using his or her personal auto to make deliveries for the restaurant. The questions that must be answered include:

• Is there liability coverage in the personal auto policy (PAP) for food delivery?

• Is coverage provided by the business auto policy (BAP) for employees using their  personally-owned autos for food delivery?

• Who is covered by the BAP, if coverage is provided?

• Which policy is primary?

• Which policy is excess?

• What key endorsement is needed?

Coverage in the PAP

Decades ago, pizza and maybe Chinese food delivery began the PAP’s delivery coverage  debate. Does the personal auto policy cover food delivery? Note that as this question is answered, Grub Hub, Uber Eats and every other such app-based food delivery service are completely ignored. The focus here is solely on food delivery by the employee of one restaurant.

PAP Exclusions of Interest

Whether the PAP provides liability coverage for food delivery is a function of two exclusions: the business use exclusion and/or the public or livery conveyance exclusion.

Business Use Exclusion: The business use  exclusion is a non-factor in this discussion. The PAP excludes the use of an auto when being used in an auto-related business (sales, service, repair, etc.), unless the car is owned by the named insured, a family member or others provided the car is listed on the PAP. So, this exclusion can be ignored.

Public or Livery Conveyance Exclusions: This exclusion may have more teeth. The applicable part of this exclusion reads:

EXCLUSIONS

A. We do not provide Liability Coverage for any “insured”:

5. For that “insured’s” liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance.

Does an employee delivering food qualify as either public or livery conveyance? If so, the PAP provides no coverage. Although generally phrased as one concept, public conveyance and livery conveyance are actually two  different threshold requirements (notice the “or” between the terms). Let’s define both terms to clarify coverage (or the lack thereof).

• Public conveyance: Making the vehicle available for public use (like a common carrier);

• Livery conveyance: Carrying persons or property for a fee.

Is food delivery for one restaurant considered “public conveyance”? No, the vehicle is not available for public use; it is being used by the employee on behalf of his/her employer only, and only for a single purpose – food delivery. Making the vehicle available for public use is what the ride sharing and food delivery apps do. When working for one restaurant, the vehicle is not available to others (to the public).

However, does food delivery trigger the “livery conveyance” exclusion? The employee is carrying property (namely food), but is the cost of the food considered a fee? And considering fees, does charging a separate delivery “fee” make a difference?

Courts seem to agree that an employee delivering food for an employer is not livery conveyance, even if a separate delivery fee is charged. In a livery conveyance, the fee is charged by the carrier as their remuneration for providing the service. In pizza delivery or food delivery, the fee is charged by the employer for its own purposes (probably a charge for convenience) and is not necessarily for the benefit of the driver.

Remember, the public or livery conveyance is intended to exclude coverage for those who are in a common-carrier-like business, not the person using their personal auto to delivering property for his or her employer.

This discussion is a long way around to answering the question of coverage in the PAP. Yes, there is coverage for food delivery in the PAP. But this doesn’t mean carriers won’t try to utilize the public or livery conveyance exclusion if the injury is bad enough.

BAP and Employee Use of a Personally Owned Auto

If the employer/restaurant has a business auto policy, does that policy extend coverage for the employee’s use of their personal auto for any reason, particularly to deliver food? Secondly, who is covered?

Is Coverage Provided?

Whether liability coverage is provided by the BAP for an employee’s use of his/her personal auto on behalf of the employer is a function of the coverage symbol or symbols used.

• If Symbol 1 – Any Auto is used, yes, there is coverage. If any other primary symbol is used  (2, 3, 4 or 7), no, there is no coverage.

• If the primary liability symbol used is 2, 3, 4, or7, the only way there is coverage for use of the  employee-owned auto is if Symbol 9 –  Non-Owned Auto is also used within the liability coverage.

If either of these requirements is met (Symbol 1 or Symbol 9), then the BAP provides coverage for the employee’s use of their personal auto. But that is only part of the issue. Who is covered by the BAP?

Who is Covered by the Unendorsed BAP?

When the employee is using his or her personal auto on behalf of the named insured only the named insured (the restaurant) is protected by the unendorsed BAP. The exclusion for the employee is clearly stated within the Who is an Insured provision:

1. Who Is An Insured

The following are “insureds”:

a. You for any covered “auto”.

b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except (this means they are excluded from coverage):

(1) The owner or anyone else from whom you hire or borrow a covered “auto”.

This exception does not apply if the covered “auto” is a “trailer” connected to a covered “auto” you own.

(2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

Again, this means the BAP protects only the named insured restaurant when the employee uses his/her personal vehicle to deliver food. Worse still, because the employee is not an insured in this situation, the employer’s business auto carrier can actually subrogate against the employee.

But remember, this is how the unendorsed BAP responds, there is an endorsement that solves this problem. But before we get to the solution, we need to understand how the PAP and BAP dovetail.

Which Policy is Primary and Which is Excess?

Even though the business is benefiting from the employee’s use of his/her personal auto, the employee’s personal auto policy provides primary coverage in the event of a claim. This primary protection extends to both the   employee and the employer.

Don’t believe me? Here is the policy language:

PART A - LIABILITY COVERAGE

INSURING AGREEMENT

B. “Insured” as used in this Part means:

3. For “your covered auto”, any person or organization but only with respect to legal  responsibility for acts or omissions of a person for whom coverage is afforded under this Part.

As is seen in this language, the employee’s personal auto policy extends coverage to the employer for its vicarious liability for the actions of the employee. Although this wording doesn’t specifically state that the PAP is primary, we need only to review the BAP for proof.

The Other Insurance provision in the BAP reads:

5. Other Insurance

a. For any covered “auto” you own, this Coverage Form provides primary insurance. For any covered “auto” you don’t own, the insurance provided by this Coverage Form is excess over any other collectible insurance.

Remember, the PAP is always primary when the policy’s named insured owns the vehicle and it is listed on the personal auto policy. The BAP is excess, but only for the employer’s benefit (unless the policy is endorsed otherwise).

Because the PAP is primary, the first issue for the employee and the employer is coverage limits. Are the employee’s PAP limits adequate in the event of an at-fault incident? Remember, both the employee and employer are covered.

Consider this scenario, the employee, while delivering food for his/her employer, is involved in an at-fault accident – hitting a surgeon on her way to the hospital. In the accident, the surgeon severely injures her right hand and can no  longer perform her surgical duties.

Will the insured (the employee) have adequate limits? Probably not (regardless of the amount). If the employee’s limits are exhausted, then the BAP responds on an excess basis (if Symbols 1 or 9 is used) – but only for the employer (in an unendorsed BAP).

Let’s throw in another “but” or “what if;” what if the employer doesn’t have a BAP? Let’s end the suspense, this is a very bad situation – for the employer.

If the employer is held vicariously liable for the actions of the employee, the employer is financially responsible for damages caused by the employee over and above what the PAP pays. This is true even if there is no business auto policy in place. The lack of insurance does not relieve a legally liable party of its responsibility to the injured party. Legal liability can be direct or vicarious (see the article “How Does a Person Become Legally Liable”).

To avoid this out-of-pocket expense, the employer needs a business auto policy to protect its financial assets – at least to the level of coverage.

Lest you get jaded and say, “But Boggs, what is the likelihood the employee will hit a surgeon?” Fair question. The victim doesn’t have to be a surgeon, nearly any accident can be financially devastating under the right circumstances.

Two recommendations so far:

• Require the employee to carry relatively high liability limits. At minimum 100/300/50. I  recommend higher with an umbrella/excess policy, but there are certain financial realities  that may make higher limits too expensive. But remember, don’t limit the insured’s  options by not letting them know that higher  limits are available.

• If the business doesn’t have a BAP, explain the dangers of not having one; namely that  the insured can still be required to pay  because of their vicarious liability for the actions of the employee. Recent anecdotal reports are that carriers are not as willing to  provide hired and non-owned liability coverage only at this point; but you have to try to find it (even in the E&S market). Some other reports are that certain carriers are going to  automatically extend this coverage if the insured restaurant did not provide delivery service previously (if the insured did provide  delivery but never bought the coverage, they are on their own, which is OK because they should have had the coverage

A Key Endorsement

Throughout this article, the fact has been highlighted that the unendorsed BAP does not extend protection to the employee when he/she is using his/her personal auto on behalf of the employer. This lack of employee   protection can be detrimental to the employee. As was previously discussed, the BAP insurer can subrogate against (seek recovery from) the employee if the BAP is required to pay to cover the business owner’s vicarious liability for the actions of the employee.

Whether the BAP carrier would want the PR storm that comes with this is irrelevant; they can do it, and if the loss is bad enough, they may. But there is a remedy.

To fix this gap and keep relations between the employer and employee intact, attach the CA 99 33 10 13 - Employees as Insureds  

endorsement. As the title suggests, the endorsement extends insured status to  employees when driving their personally owned vehicles for the benefit of the employer/insured. But this endorsement does NOT change the order of response.

Even when the CA 99 33 is attached, the employee’s PAP still responds as the primary coverage. The BAP remains excess. The

difference is this endorsement extends protection from the BAP to the employee on an excess basis. Further, as an insured, the carrier no longer has the ability to subrogate against the employee if the loss requires the BAP to respond as excess.

Always attach the CA 99 33 anytime an employee is using his or her personal auto on behalf of the employer, even in non-delivery situations such as are addressed in this article.

Takeaways

Keys to remember from this article:

• The PAP is always primary for an employee-owned auto;

• The public or livery conveyance exclusion isi ntended for those in common carrier type businesses, not food delivery for their employer;

• Don’t put it past an insurance carrier to try to  use the public or livery conveyance exclusion;

• An employer can be held vicariously liable for the actions of its employees, especially when the employee is using his/her personally-owned auto for the benefit of the employer;

• Because the employer can be held vicariously liable for the actions of the employee’s use of the employee-owned auto, the employe should carry relatively high PAP limits;

• Because the employer can be held vicariously liable for the actions of the employee’s use of the employee-owned auto, the employe should have a BAP; and

• Because there is no coverage for the employee in the unendorsed BAP, the CA 99 33 should be attached.

We are back with another Big I Buzz. This week, we are discussing why Hyundai owners are being advised to park outside and a new Century 21 lawsuit. We are also covering some important dates that you'll want to add to your calendar from the IIAW. 

Hyundai Warns Owners to Outside, Recalls 180,000 SUVs

Hyundai SUVs could catch on fire because of an electrical short in a computer. Hyundai is telling some SUV owners to park outdoors. With the fire hazard, Hyundai is recalling 180,000 Tucson SUVs in the U.S. from 2019 through 2020. As of September 9th, Hyundai knew of a dozen engine fires caused by the problem, luckily without any injuries. In addition to the computer shortage, Hyundai says if the anti-lock brake warning light comes on, the SUVs should not be driven and owners should disconnect the positive cable on the battery. If needed, owners should contact a Hyundai dealer who will provide a loaner vehicle. 

For more information on the recall, click here. 

Century 21 Lawsuit Against Allianz, Liberty Mutual, Others Just One of Many

According to Insurance Business Magazine, "The battle against business owners and insurance companies over denied business interruption (BI) insurance claims has entered a new stage, as smaller businesses face insolvency and much larger companies prepare to sue insurers. Bloomberg reported that over 1,000 companies have sued because of denied business interruption claims related to COVID-19. 

Read more about the lawsuit here. 

 IIAW Calendar Reminders

1. Add our October 1st webinar, "Impact of COVID-19 on the Insurance Industry" to your calendar. Starting at 10 a.m. on October 1st, our featured speaker, Dr. Steven Weisbart, Senior Vice President and Chief Economist from the Insurance Information Institute will cover how COVID-19 has impacted the insurance industry. Dr. Steven Weisbart oversees the Institute's program of economic research and analysis, preparing studies in support of the organization's communications mission, speaking to media and conducting briefings for member companies, industry organizations and public policymakers. He is a specialist in annuities, pensions, and life, disability and long-term care insurance. Additional, Dr. Weisbart has authored several significant research papers and articles of insurance issues, including the threat of an avian flu pandemic and the effect of U.S. population on the property/casualty insurance industry. 

Register for the webinar here. 

2. Our Online Community is launching on November 1st. IIAW's Community will help our members, vendors, sponsors and IIAW staff to connect. In addition to this new benefit, we have a big incentive for members to participate: top contributors of our Community will receive gifts and prizes that will give back to their local communities, simply for participating!

We are excited to offer our members this free and valuable benefit, and we are eager that together, as a community, we can support your local communities. If you haven't already, read more about how we are supporting you and your local communities in our September magazine here. 

If you or someone within your company would like to be a part of our Online Community but don't have an account through our website just yet, please click here. Once we receive your information, we will get an account set up under your company's membership.

3. The first of the Big "I" Wisconsin CE Days is quickly approaching. On September 29th and November 2nd, you can earn up to eight P&C continuing education credits online in just one day. Big "I" Wisconsin CE Days are being offered by the IIAW in partnership with the Big "I" Virtual University. You can register for as many or as few classes as you'd like, and you can save 25% off with promo code BIGIWICEDAY!

For more news, check out the Action News section of our weekly e-newsletter Big I Buzz.  If you aren't subscribed, click  here to add your email to our emailing list. We hope that everyone has a great rest of their week! 

Happy Wednesday, we hope that everyone enjoyed their Labor Day weekend. In this week's Big I Buzz, we discuss a new study finding that agents can do more to service their clients' needs, Amazon getting FAA approval to deliver packages via drones and an insurance company who claims to be the first with a work from home discount.

Insurance Company Claims to be the First With a Work From Home Discount

Elephant Insurance, based in Virginia, has announced to offer its policyholders and their spouses discounts for driving less during the pandemic. According to Insurance Business, "In a move that the direct-to-consumer insurance company claims is a national first, the Admiral Group company doesn't require any telematics devices, just a statement explaining the number of days that their customers now work without commuting to the office." The new discount scheme will start in Indiana and Tennessee from October 14, Illinois, Maryland, Ohio, Texas and Virginia for policy renewals after October 19th, according to Insurance Business. Learn more here.

Amazon Gets FAA Approval to Deliver Packages By Drone

The Federal Aviation Administration officially designated Amazon an "air carrier" on Monday, paving the way for Amazon to start testing its plans to drop off packages within 30 minutes, according to the New York Post. Amazon will begin testing customer deliveries for packages under 5 pounds with drones. According to the New York Post, "For Amazon to effectively rely on drones for regular deliveries, it must be able to pre-program the drone's routes and let them fly without human pilots watching their every move, but US regulations don't currently allow for completely autonomous flights, Bloomberg reported. The FAA would also have to develop a new air-traffic system to track low-altitude drone flights, as well as come up with rules to minimize the risk of drones striking other aircraft and disturbing human activity below." Read more about Amazon's move to deliver via drones here. 

Agents Could Do More to Service Clients' Needs, Study Finds

A study from Nationwide's largest Agent Authority research surveyed 2,600 U.S. independent insurance agents, small-business owners, mid-market business owners, mid-market business owners with fleet vehicles and general consumers between June 9 and June 25 to understand what business owners and consumers value in their insurance relationships. The survey revealed there's a perception gap in the value agents believe they are bringing to their customers, according to Property Casualty 360. According to the article, "In one example, 95 percent of insurance agents said they are always there when their clients need them, but only 79% of customers felt the same. Similarly, 94% of agents reported they are regularly checking in with their customers; however, only 69% of customers said they receive sufficient check-ins from their agent."The survey also found that there's a need for expertise in the following lines of business, in addition to property and casualty support: 

"•26% of consumers want guidance on retirement planning

• 39% of small-business owners want help with business interruption or disaster planning

• 35% of small-business owners are interested in safety and loss control resources

• 18% of small-business consumers want information on cybersecurity and retirement," according to Property Casualty 360. Read more about the study and its findings here. 

For more news, check out the Action News section of our weekly e-newsletter Big I Buzz.  If you aren't subscribed, click here  to add your email to our emailing list. We hope that everyone has a great rest of their week! 

By Chris Boggs | CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS, is IIABA's Executive Director Risk Management and Education

Focus is key! From an errors and omissions (E&O) perspective, agents cannot lose focus during this disrupted work setup. Working from home does not change the fact that all procedures and processes that apply in the home office also apply at the "home" office.

From now until we are released from our lockdown and able to return to normalcy, we must remember that every action or inaction has consequences - good or bad. There are a few simple rules or guidelines agencies and agents should follow during this unprecedented moment in time to avoid or lessen the effects of an errors and omissions claim. 

Rule #1: Document! Document! Document!

Franklin D. Roosevelt may be the most famous cheerleader of all time (other than Toni Basil). It’s true. As a student at Harvard he was a cheerleader for home football games. Some years later, he led the country through World War II, using his fireside chats to calm America’s tensions and fears. He was still a cheerleader. Given the tensions and even insecurity some feel as we live through our current pandemic panic, we need a cheerleader and simply a leader to keep us calm and to keep us focused. Roosevelt was a forward thinker; he actually wrote a cheer to help agents remember Rule #1 for working from home. Are you Ready? OK! Document day; Document night; Document left; Document right; Document, document, document! Yea, document! OK, so maybe this isn’t a Roosevelt original, in fact it’s a pure fabrication – but the point is no less relevant. Even when working in a non-traditional space, remember to document every conversation, text, email, yell, whatever. When it involves a client, document it.

Rule #2: Keep the Schedule You Had at the Office

No, this isn’t limited to “open” and “close” times; this refers to regularly scheduled staff and team meetings. Not being in the same room is no excuse for ending activities necessary for the successful operation of the agency. Basically, if it was important for the agency and the teams leading up to the disbursement, it still is.

“We have our normal commercial lines staff meeting on Mondays at 10. We go over new and renewal business, lost accounts, cancellations, claims, accounts with issues, industry news and current events and any issues that popped up that need to be addressed,” reports one agent. “We also have individual team meetings for personal lines and employee benefits.”

Another agent tells us, “Zoom is our new contact method for client meetings and for meetings with staff. We have ‘Town Hall’ meetings every Friday afternoon with all employees; producer meetings every Monday morning; the commercial lines, personal lines and employee benefits teams have staff meetings once per week; and the Leadership team has probably had Zoom meetings 10 times over the past three weeks.” E&O Exposures: Increased When Working from Home? PROFESSIONAL LIABILITY. Keeping everyone connected and informed is paramount when everyone is in the office. But when there is no office “atmosphere,” keeping everyone connected and informed is even more important.

A cornerstone of these meetings should be policies and procedures. Pick one errors and omissions topic and remind every person on the call of the office procedure relevant to that topic. This conversation does not have to take more than three or four minutes. One topic, one reminder - this keeps the staff on course. 

Rule #3: Keep "Them" Close and Informed

Your clients and your carriers are living in this same altered reality in which you are living. Any sense of normalcy is welcomed.

Stay in contact with your clients and keep them informed. As their agent, your insureds will likely turn to you more now than in the past. News reports, press releases and the problem of “someone told me” will certainly spread a lot of misinformation among your customer base.

To manage and hopefully end the spread of misinformation, you need to know the correct information. Know policy language, know the carrier’s processes and plans, know the insurance regulations, and know when to say “No.” From an E&O perspective:

• Never answer a coverage question without the insured's policy in front of you. Even the most "common" policy has "uncommon" endorsement you may forget were attached.
• Not every carrier is the same; in fact, no carrier is like any other carrier. Know the underwriting guidelines and what can and can't be done for the client. Don't promise something until after you know it can be delivered. 
• Don't practice outside your licensure. As a licensed agent, your job is to procure and manage the insurance program with and for the client. You are not licensed or qualified to offer an opinion on contract wording or other legal matters. 

Remember also, you are not licensed to help complete federal forms unrelated to insurance. Direct the insured to the proper professional; don’t create an E&O problem by being too helpful.

Your underwriters need to hear from you as well. In fact, they may want to hear more from you now than in the past because they may be lonely. Kind of a weird thought, but many underwriters are used to working in an office with other humans; being alone is hard on them. Even field underwriters who normally work at home are accustomed to meeting with and talking with agents face to face on a regular basis.

Keep the underwriters informed when something new is learned about a client. Talk with them about unusual situations or unusual requests made by the insured. You and your underwriter may be able to find creative solutions that best serve your client and the carrier. You also want to know what the carriers are thinking and planning in regard to renewals. Are there new endorsements coming that may limit coverage? Find out during these “keeping in touch” calls, it may help avoid an E&O situation.

Many insureds are concerned about money as a result of state-mandated lockdowns. Commercial lines clients may essentially be out of business, personal lines clients may be out of a job; the result is the same for both clients - fear. The fear of having to choose among feeding their family, paying the bills or paying insurance premiums. When this question arises, this is a conversation that involves both your insured and your insurance carrier. Everyone must be informed.

When the specter of policy cancellation appears, address it directly and appropriately. 

• Know if your state has enacted any temporary measures regarding cancellation for non-payment. Current information is available here.
• If a regulation is in place, advise your client of the regulation and give them a copy of the wording. 
• Advise your insured to never cancel any policy and document the conversation. 
• If the insured insists on cancelling any policy, make use of a cancellation notification letter. 

Rule #4: Recognize Potential Weaknesses

“One of my E&O concerns is our new producers and what they are telling prospects and customers. Are they writing the correct coverages on new and renewal accounts? We do have mentors for each of the new producers and we hope nothing is falling through the cracks,” reports one agent.

This agent’s concern is probably the same as many other agents, what are the new, less experienced employees doing? Are coverages being written correctly? Are questions being answered correctly? Do they know and understand the agency procedures well enough to properly protect the client and us?

These are valid concerns. One drawback of working from home is the loss of “quick confirmation.” Generally, employees have the ability to quickly check their understanding of the policy language, an underwriting guideline or anything else with someone in the office; all they have to do is walk to someone’s desk and ask for help.

Well, unless there is an open-line Bat Phone there is no one to ask and get an answer from quickly. Emails, instant messages and/or phone calls have to be made to get the answer. Some agents feel like the insured is unwilling to wait for an answer and will just “wing it” and hope they are correct, or that if they are wrong, nothing will happen to highlight the error.

Make sure every employee understands this is NOT OK. It is never acceptable to “wing it,” and the current situation does NOT change that fact.

Train every employee, not just the new employees, that it is acceptable for them to explain to the client that they don’t know the answer or that they want to confirm the answer. Rarely is the insured unwilling to wait for a correct answer. “Mr. Insured, that is a great question. Let me confirm the answer and call you right back. I would rather give you the correct answer the first time.”

Then, do what you promised. Get the answer as quickly as possible and call the insured back as soon as possible. The insured will be satisfied and you will be able to sleep well. (Oh yeah, don’t forget to document the conversation and follow up in writing with the insured.)

Last Rule: Don't Forget Your Upbringing

As my kids got old enough to go out with friends and on their own, I would always say, “Remember who you are; whose you are; and who you represent.” My goal was to impress upon them that their actions affected more than just them.

Every employee’s actions affect the agency – positively or negatively. It is necessary to remind your employees, often, that what they do matters; not only does it matter to them, it matters to everyone in the office.

Train them, retrain them, and train them some more on E&O avoidance. Make it part of the fabric of the agency. Make it important. When it is important to the leadership, it is important to everyone.

Now that they are “out on their own,” in some respects, training will show. That statement should bring you comfort, not scare you. If it scares you, let’s talk. 

Learn more about Big "I" agency risk management here. 

By: Chris Boggs | Big "I" Virtual University Executive Director

Company Bulletin 2020-15 issued June 8, 2020, by the Illinois Department of Insurance (IDOI) threw key provisions of the business income policy out the proverbial window. In its  bulletin, the IDOI addressed the recent riots and how thedepartment expects insurance carriers to respond.

In a press release accompanying the bulletin, the IDOI and Governor’s office stated: “Damage to businesses followsdramatic declines in revenue for businesses across the state as a result of COVID-19 pandemic. As the state works with businesses to recover, the governor’s office and IDOI have made expectations clear to insurance companies.”

To clarify the IDOI’s expectations, the bulletin states, in part:

The Department hereby requests that all insurers licensed or authorized to transact insurance business in this Stateimmediately implement the following protective measures:

• To the extent business interruption provisions are included and operative under a policy, insurers should base payouts on business activity levels that eliminate the impact of COVID-19.

Note the highlighted phrase. The IDOI is directing theinsurance carriers to pay losses they do not owe. Why do the carriers NOT owe the loss when coverage is written using Insurance Services Office (ISO) or similar language? Because both business income policies, CP 00 30 10 12 - Business Income Coverage Form-With Extra Expense and CP 00 32 10 12 - Business Income Coverage Form-Without Extra  Expense, apply the same methodology for determining

business income loss payments, specifically both policies state:

3. Loss Determination

a. The amount of Business Income loss will be determined based on:

(1) The Net Income of the business before the direct physical loss or damage occurred;

(2) The likely Net Income of the business if no physical loss or damage had occurred, but not including any Net Income that would likely have been earned as a result of an increase in the volume of business due to favorable business  conditions caused by the impact of the Covered Cause of Loss on customers or on other businesses;

(3) The operating expenses, including payroll expenses,necessary to resume “operations” with the same quality of  service that existed just before the direct physical loss ordamage; and

(4) Other relevant sources of information, including:

(a) Your financial records and accounting procedures;

(b) Bills, invoices and other vouchers; and

(c) Deeds, liens or contracts.

Paragraph 3.a.(2) in both ISO’s business income policies state that the loss is partly determined based on the LIKELY Net  Income. If the business was considered “non-essential” and was thus closed in an attempt to control the spread of COVID-19, the likely Net Income is zero. No dollars were being earned.

IDOI is strongly suggesting (maybe requiring) insurancecarriers to ignore this and similar policy language. Carriers appear to be expected to pay business income claimsresulting from riots and looting as if the business was fully operational.

The Independent Insurance Agents and Brokers of America (Big I) addressed the issue of covered losses occurring during the period of shut down as a result of COVID-19 in late March. As was specified in this article, the only business income loss any carrier should owe is the amount of income lost AFTER the business COULD have opened but was not able to because of the property damage.

Any carrier paying claims not supported by policy language is doing so in violation of the principle of indemnification, the cornerstone of property insurance. Paying losses unsupported by policy language puts the insured in a better position than they would have been had these losses not occurred. This is a slippery slope carriers need to stay off.