COVID-19 – The Case for Covering Uncovered Events in Personal Insurance

22 de September de 2023
By Ana Paula CostaJoão Marcelo dos Santos

COVID-19 is one of the most challenging events for humanity, its welfare and protection systems since we began writing history. The lack of paradigms and precedents generates reactions whose degree of maturity and technical correctness vary.

Even regarding the treatment of patients, we see incompatible views supposedly based on science about what should be done.

Specifically regarding the Brazilian insurance sector, at the start of the crisis, it was proposed to insurance companies to cover losses related to COVID-19, even involving expressly excluded risks. Due to the nature of the losses and the humanitarian nature of the proposal, it was directed to life insurance.

This coverage would be an act of humanity, solidarity and empathy on the part of the insurance market with those affected by the pandemic.

In this context, some questions should be raised.

An act of solidarity or empathy should not be funded from technical reserves intended for claims payments. Otherwise, the resources allocated to cover losses could, in theory, in very adverse scenarios not adequately anticipated, become scarce when actual covered losses occur.

Regardless of whether they are needed or not, since the Brazilian insurance sector has an exceptional capacity to withstand events of this nature, acts of solidarity should be directly funded by the shareholders of the insurance companies or by their equity, in very broad terms, where the resources intended for the shareholders are allocated more freely by them.

Treating such events as losses covered by insurance contracts suggests that the exclusion was invalid or that insurers can decide to disregard legitimately contracted exclusions. Both assumptions are obviously wrong and are likely to generate future distortions.

We know that such decisions are not easy and that the moment does not allow for the luxury of carefully maturing them.

We also know that, in Japan, the creation of humanitarian funds by insurers and reinsurers to compensate losses not covered was elementary in the reaction to the serious natural events that occurred in that Country.

In Latin America, however, the experience of humanitarian funds has been terrible. Perhaps this is due to our lack of respect for contracts and other cultural elements that are not useful for our development – elements that, by the way, are much more problematic than our supposed “open veins”, the central point of our fallacious victim mentality, which is even infiltrated in our court decisions in cases related to consumer relations, insurance and health plans.

In any case, we would do better to align ourselves with Japan.

There are a plenty distortion resulting from the wrong treatment of the issue.

We have already seen articles by respected lawyers “making it clear” and “revealing” that such payments for uncovered losses are nothing more than recognition of the illegality of pandemic exclusions.

We have seen the leaders of developed countries declaring that pandemic exclusions, as they relate to business interruption coverage, are not fair because companies have had insurance without claims for many years. It is unnecessary to show that populist statements like that wouldn’t be said even in a bar conversation, let alone if we were seriously discussing adequate responses to the pandemic.

It should be noted that the issue of business interruption coverages is, broad speaking, usually associated with property losses of covered assets, which, in theory, would greatly reduce the chance of losses caused by the pandemic being covered. On the other hand, life insurance policies exclude losses due to pandemics and have had their reserves set aside to cover such losses.

This is not to say that there are no losses caused by the pandemic that were covered by insurance. For example, we have learned of insurance policies that have been agreed and renewed since 2003 to compensate losses caused by the cancellation of the Wimbledon tennis tournament because of the pandemic.

In any case, in the future, other stressful situations may be subject to the mistaken treatments mentioned above, and the impacts may not always be comfortably held by insurers.

Situations such as collective policies, in which the insurance was agreed before the pandemic, but which policyholders join afterwards, especially considering our practice of “open” policies marketed to undetermined groups, are possible catalysts for coverage even when the eventuality of the risk is mitigated. This occurs even if pandemic exclusions or COVID-19 exclusions have been expressly established.

There are already claim actions claiming the prevention of the non-payment of contributions from resulting in the loss of healthcare plan. At this point, it is important to assert how the absolute essentiality of a healthcare plan is used to destroy its early viability when it needs resources the most.

In short, the exhibition of human solidarity and the behavior of companies with the economic capacities to help the victims of COVID-19 perhaps are the most beautiful aspects of the tragic situation we are going through. They are the base of the prediction that, after the storm, we will discover how much better we can be.

In fact, empathy seems, as has been said so many times, to be the most distinctive trait of the human being, what allowed us to invent cities, industries, technology and love. And no empathy and solidarity exercise can be attacked at this time, even if it doesn’t achieve the best results or it is executed wrongly.

However, there is no reason to confuse solidarity with a contractual obligation. On the contrary.

*** The propose of this Paper is only for information and does not contain any opinion, recommendation or legal advice from Santos Bevilaqua Advogados related to the matter discussed.


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