No one could have foreseen … or could they?

People booking vacation flights or cruises have the option of purchasing trip cancellation insurance, but Kim Terrio of Penny Pitou Travel says many of them forego the insurance, saying, “I’m going to go no matter what.”

With the world experiencing disruptions of all kinds due to the coronavirus pandemic, those travelers now have reasons to regret that decision. Southwest Airlines announced on Tuesday that it is cutting more than 40 percent of its flights between May 3 and June 5. Cruise lines have been blocked from certain ports, leaving passengers stranded and would-be passengers reluctant to use their bookings.

“Down the road, people will ask a lot more questions about travel,” said Terrio. “When we get back to normal, they’re going to line up for those ‘cancel for any reason’ policies.”

Terrio said the pandemic demonstrates the importance of policies that set no limits. “Standard policies don’t cover pandemics,” she said. “Some policies will give back a portion of the price, but not a full refund.”

Terrio said the vendors that Penny Pitou Travel deals with on a regular basis “are such reputable companies that most clients are coming out with great outcomes — refunds or future travel vouchers.”

No one could have foreseen the upheaval from the pandemic, she said. “It’s going to have a huge impact on the travel business as we know it, but after 9/11 it came back, and after the recession, the same thing. The only thing I fear is we’ll lose some very good companies.”

Insurance liability

Like travel agents, local insurance agents serve as advocates for their clients, but the coronavirus pandemic is altering the landscape in ways that can cast the agents as villains in decisions that are beyond their control.

Such is the assessment of part-time Alton resident Gerry Kennedy and his partner, Rogan Dwyer, of Observatory Holdings, a risk management company.

“The local agent’s responsibility is to the policyholder,” said Dwyer. “They’re there to help the policyholder buy the right policies to protect them, and advocate for them, and they have an ongoing duty to help that policyholder.”

As restaurant owners found out when they had to curtail their services or shut down under government order as a way of slowing the spread of COVID-19, the insurance providers denied coverage under their business interruption policies, saying the policies cover physical losses but not pandemics.

Kennedy and Dwyer say that’s not the case, and emphasized that the local agents are not responsible for those denials.

“Insurance policies are a contract of adhesion,” Dwyer said, “something the courts have ruled many times. The insurance companies draw up the contract, the agents submit it to the policyholder to agree, so it’s the responsibility of the insurance company to specifically exclude what they’re not liable for. Insurers are responsible for everything they have not specifically identified for exclusion.”

That is where companies such as Observatory Holdings come in. Their job is to calculate the insurance liability from claims.

When it comes to travel insurance, Dwyer said, there may be pandemic exclusions, but even if the policy did cover the coronavirus, “it is a very specific amount on cost, without ancillary expenses. Other types of insurance extend to home offices and third-party exposures.”

Cyber hurricane

Observatory Holdings originally was concerned about cyber breaches, which they calculated could place insurance liability into the trillions of dollars. They deliberately chose the catastrophe-type term “cyber hurricane” to describe a situation they said “would almost put us on a war footing.”

Kennedy and Dwyer have been warning insurance companies for three years that they have that risk on the books without rating for it, and that there was no way they would be able to mitigate the losses and did not have enough in reserves to pay the potential claims. They suggested separating the coverage, much like flood insurance, because there was no language in their policies to say it’s not covered.

The same numbers that they derived for a cyber hurricane apply to the coronavirus pandemic, they say. “Everything’s affected by it,” Dwyer said.

In a recent paper, Dwyer wrote, “The insurance industry is broken but either has not realized it yet or is ignoring the flashing red warning signs. There is not enough money in the system to pay the tsunami of claims that will fall upon carriers from legal rulings on coverage from the Coronavirus catastrophe, an impending cyber ‘hurricane’ and the knock on effect they will have to almost all classes of business.”

Having failed to prepare for the pending claims, insurance companies have been telling clients that their business interruption policies do not cover pandemics.

According to Kennedy and Dwyer, the companies are telling the local insurance agents to refer their clients directly to the insurance carriers.

“That removes the ability of the agent to be an advocate for the policyholder,” Dwyer said. “That agent therefore finds it harder to do their job, and they’re also vulnerable for accusations they have no knowledge of or ability to discuss. Also, it puts into question whose client is the policyholder, and threatens the agent’s very existence.”

Lakes Region insurance agents who were contacted for comment did not return calls from The Laconia Daily Sun.