I was in a company advisory board meeting (Zoom, of course) this week and we were discussing the general state of the insurance industry. A report was presented on the status and impact of business income claims due to the pandemic shutdowns of non-essential business operations. In the US alone, around 1,500 lawsuits have been filed by policyholders whose BI claims have been denied by their insurance company. Of those 1,500 cases, 278 have reached the courts. 243 cases have been dismissed or otherwise settled in some manner that favored the insurance company and 35 have been settled in favor of the policyholder. It was interesting to read some of the summaries. While it never would have occurred to me to sell “pandemic insurance” prior to 2020, I also never imagined that the interpretation of the “direct physical loss” condition in the insurance contract would be questioned. Plain as day, right? That is until there is a total eclipse of the sun! This will play out for years to come both in coverage options and a better understanding of coverage form and provisions. I just hope that at some point we are given the means to insure against this type of catastrophe and that we will never need it.
Another significant fallout of the pandemic that we should be paying close attention to is the increased cost of building materials. Jerry, our building manager, was telling me that the cost of a sheet of OSB plywood has more than doubled and that a 2X4 is now more than $8! I guess I’m old because I still think a 2X4 should cost $2! Between the high demand from people doing home projects (what else do you do when stuck at home?) and the slowdown in manufacturing and distribution, the costs have truly skyrocketed. This means every discussion we have with a client about insuring a property should also include revisiting building valuations. Only a true building appraisal can tell you what the cost to rebuild would be, but one thing is pretty certain, my old standby estimate of $150 a square foot is definitely not in the ballpark anymore.
Our jobs truly do depend on our willingness and ability to advise our clients and to point out how their assets have potentially appreciated just in the last 12 months. No one wants to come out of a pandemic only to face a co-insurance penalty on a covered loss! While I am confident as professionals, coverage reviews are SOP, I think our current circumstances call for this to be a higher priority. Plus, you know Tuscano provides a no-strings-attached building cost estimator on our website. It’s just one of the many value-added services we offer. We write all sizes and types of property and would love to work with you on your next commercial and/or personal lines property-driven risk.
By the way, happy April Fool’s Day! This is no joke! April is flood month! Precipitation may be wet or white and cold, but when the ground warms up, the waters will flow. I know I talk about our flood program frequently but you’d be a fool not to give us a shot on your flood business. We make getting a quote easy and our program has some real advantages over the NFIP. Learn more and get a double benefit by attending our free (value-added!) CE webinar this month on insuring flood risks. Sign up on our website at www.tuscano.com/ce.
Don’t forget, our office will be closed tomorrow, April 2, for the Easter holiday. We’ll be back and hard at work for you on Monday. Have a wonderful weekend!