Due to the accelerated spread of COVID-19, exceptional measures have been adopted. Here we identify the essential issues that have an impact on the private insurance and reinsurance sector.
Given the current situation in Spain caused by COVID-19, the Spanish government has declared a state of emergency and it has adopted exceptional regulations through the Royal Decree 463/2020, March 14 ("RD"), complemented by Royal Decree-Law 8/2020, March 17(“RDL”). The main impacts on the insurance sector are as follows:
a. Business continuity
The RD states that insurances are essential services and allows for business continuity for insurance undertakings. Even when telework is highly recommended, insurers are allowed to continue their activity during the lock down period.
b. Suspension of procedural, administrative, prescription and expiration terms
Procedural terms before Courts are generally suspended in all jurisdictional orders, except in special procedures.
The administrative procedures followed before the Spanish regulator, General Directorate of Insurance and Pension Funds (“DGSFP”) and the procedures before the Insurance Compensation Consortium ( “CCS”) are also interrupted. Notwithstanding, the DGSFP and the CCS may agree the continuity of procedures to avoid serious damage to the rights and interests of the interested party and provided that the latter expresses his agreement.
The application of the statute of limitation is also suspended. Nevertheless, insurers shall continue to honour their obligations towards insureds and beneficiaries which implies, meeting service levels. However, the situation of the state of emergency and the excepctionality of the circumstances should be also considered.
c. The Insurance Compensatium Consortium (CCS)
Pandemics such as that derived from COVID-19 are not listed as risk eligible for cover as “extraordinary risk” under the CCS Regulation, thus it does not seem foreseeable that the protective action of the CCS can directly provide coverage for claims arising from COVID-19.
2. ANALYSIS OF SOME LINES OF BUSINESSES / INSURANCE PRODUCTS
a. Health and life insurance
These policies usually provide coverage for risks derived from illness without excluding compensation linked to viruses such as COVID-19 nor pandemic, so in general, nothing would prevent coverage in accordance with the terms agreed in the contracts.
b. Travel and event cancellation insurance
The terms, conditions and exclusions agreed between the parties in each insurance contract must be observed.
c. Pecuniary loss, credit and surety insurance
- Pecuniary losses: in most of the policies the trigger to cover loss of profits / loss of rents is the occurrence of a property damage. In this event, cover for the losses of benefits or income due to the decrease or cessation of activity derived from the RD, could be arguable. The cover for loss of benefits for those cases in which the closure or the impossibility of access to the insured facilities is determined for various reasons shall be assessed in light of the agreed terms and conditions.
- Credit and surety. The provisions of the definitions of risk of default contained in each insurance contract will be followed.
d. Directors and Officers liability (D&O)
Claims for lack of preparedness, poor contingency planning and general mismanagement could also increase under D&O policies, also in the context of restructuring and insolvency processes. In case of later claims against companies for the consequences of COVID-19, it will be necessary to review terms agreed in the policy and the action of the insured.
e. Professional, Employer, Exploitation and Product Civil Liability Insurance
Policies covering claims for breaches or delays in the development of work, and policies covering employer responsibilities (whether COVID-19 could be considered an occupational accident or not), must be analysed on a case-by-case basis, considering all the circumstances.
f. Auto insurance
The conditions of automobile insurance policies are not altered or modified.
It is advisable in any case to review the wording of the conditions of the policy and, if necessary, request advice to determine the true scope of the contracted coverage, as well as the effectiveness of the contracts.
The information contained in this note is of a general nature and does not constitute legal advice of any kind. DWF-RCD is not responsible for any content that is in contradiction with new information released later.