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Batching healthcare professional liability / general liability claims

Coverage in a COVID-19 world

N/A
COVID 19 Coronavirus

By Kirsten Beasley and Jim Dorion | June 19, 2020

This article discusses the complexities associated with batching COVID-19 incidents and claims.

The batching of COVID-19 incidents and claims is a complex matter that requires expert analysis of: insurance structures, policy language and variant carrier stances. 

What is ‘batch’ wording? Insurance policy language that defines how an insurer will treat multiple related claims.

The decision to seek recovery of COVID-19 healthcare professional liability / general liability (HPL/GL) costs is one that most clients will have to navigate; oftentimes before the magnitude of those costs if known and whilst simultaneously renewing their insurance program.

Why does ‘batching’ matter?

Because it influences:

  • Retentions/deductibles that must be absorbed
  • How much the primary/first layer will pay
  • Whether and when the higher layers of insurance will consider underlying layers of coverage exhausted and “attach” to COVID-19 losses
  • The amount of time an insured may have to report similar incidents/claims AND which policy years are affected

What are the pertinent coverage elements?

To understand how batch coverage may apply the policy as a whole must be considered. However, there are several more prominent coverage elements that dictate the bulk of the batching mechanism:

  1. 01

    Batching (related claims/incidents) Clauses

    As there is no ‘standard’ batch language in the marketplace; batch clauses have great variation in both their terms, their application and their interpretation. Indeed, the same language can be interpreted and applied differently by separate insurers.

    Batching terminology within the policy typically uses language like: related incidents or related claims (or both) and can be found in limits of liability conditions, definitions and/or endorsements.

    The mechanism for batching claims (determining how incidents/claims are or can be related) is also highly variant. Insurers use different (and usually undefined) terminology, such as “logically related”, or “causally-related” or sometimes the ‘relatability’ mechanism is unspecified (potentially allowing for broader interpretations). This variance allows for a spectrum of interpretations about what types of incidents/ claims can be related:

    • All claims at each individual facility
    • All claims grouped by state
    • All Covid-19 claims, wherever they happen
    • Some other factor

    Batch provisions can sometimes contain time elements like incident or claim reporting windows (time periods for noticing related incidents or claims) and language which specifies that one policy limit is available and which policy year is applicable.

  2. 02

    Some of the unknowns

    • Will any (all?) subsequently filed claims be deemed reported during the policy?
    • What if there are subsequent waves of COVID-19 and/or COVID-19 claims?

    Overall, the spectrum of terms and variant interpretations can create great uncertainty around COVID-19 batch coverage outcomes.

  3. 03

    Knowledge Exclusions

    Any coverage analysis must also consider the knowledge exclusion (both current and prospective). The knowledge exclusion removes coverage for any incidents that are known about subject to some key considerations:

    • An ‘effective date’ of knowledge - commonly called an awareness date (i.e. the date prior to which there is no cover for any known claims).
    • What constitutes knowledge? Oftentimes, knowledge is tied to awareness of an incident at a certain personnel level/role of the insured, (e.g.; risk manager, general counsel or executive officer level). Knowledge exclusions also often contain a ‘reasonability threshold’; i.e., knowledge may be deemed to attach only once the insured reasonably expected an incident to result in an actual claim. Note: Policy holders should take caution here, as some language stipulates that knowledge attaches to the incident whether it was deemed likely to develop into a claim or not.
    • Why does knowledge matter? Is knowledge of the pandemic enough to trigger a knowledge exclusion and preclude go forward coverage?
  4. 04

    Notice Provisions

    Notice provisions may be especially critical for ‘in-flight’ scenarios (like COVID-19) where there are a slew of incidents but no (or few) claims; as may be the case for many clients. It is also important to review the notice provision to determine at what stage in the claim lifecycle notice is permitted: incidents, incidents reasonably likely to become a claim, or only those that are claims. Notice provisions also often specify a requirement for additional incident/claims details. Finally, some policies have specific batch notice requirements with nuanced elements: e.g. language that allows for permissive (client determined) notice.

    Claim Reporting Guidance for healthcare clients With respect to COVID-19 exposures, it will frequently be beneficial to:

    • Report incidents, potential claims and claims to all layers of coverage before policy expiration; and
    • Include all elements of information required for a valid notice of incident, potential claim or claim.

Appropriate elements to include in the notice will be based on the specific, applicable policy language, which may vary by layer.

Insurers have been pushing back on these reports, so every effort to provide enough detail to support a basis for a potential claim should be made. We have seen, for example, insurers ask for all reasonably obtainable information with respect to the time, place and circumstances of the event for which coverage is sought along with a brief statement why the insured believes a claim is likely to be made.

Disclaimer

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. COVID-19 is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

Authors

Kirsten Beasley
Head of Health Care Broking, North America

Jim Dorion
General Liability Claims

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