The strength of policy wording continues to be tested in courts around the world, and while US state and federal court rulings on Covid-related business interruption claims having been found overwhelmingly in favour of insurers, outcomes have been less favourable for insurers in other jurisdictions.

According to a commentary from DBRS Morningstar, BI losses from the pandemic could have been catastrophic had insurance contract policy wording not been clear enough to prevent considerable payouts in some jurisdictions, insurers having benefitted from experience dealing with SARS claims in the early 2000s.

DBRS’s analysis found that disputes between insureds and carriers are not limited to BI losses, with other instances where coverage has been denied in costly legal disputes stemming from ambiguous policy wording. Government intervention, it said, could compel insurers to pay claims where interpretation is vague or out of date.

“The select cases discussed in the commentary show that it is imperative that insurance companies review and update policy wording regularly. Losses from coronavirus-related BI claims could have been catastrophic for the industry had policy wording not been precise enough to withstand court challenges in most cases. Some small players in the industry could have found themselves facing liquidation, or significant capital depletion at the very least, while some companies' credit ratings could have been adversely affected,” said Victor Adesanya, vice-president, Insurance.

“We expect that insurers that faced adverse court decisions, or test cases as observed in the UK and Australia, will move quickly to tighten their policy wording. Insurers in general should review their policy wording regularly to avoid ambiguity, costly litigation, and regulatory intervention.”


See the Q1 2023 issue of CIR Magazine for more Covid-related BI claims analysis.

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