What You Need to Know About the New ISO Endorsements

As COVID-19 continues to disrupt the economy and force closures to enable social distancing, businesses are losing income and incurring additional expenses at an exponential rate.

The Situation

Many of these businesses who have filed claims against their business interruption coverage have found that their policy explicitly excludes infectious diseases, viruses, and bacteria. This has resulted in several thousand claims being denied in just a few months. But as we have seen in recent weeks, several organizations have responded to these denied claims by filing lawsuits that seek coverage for financial losses sustained due to the pandemic.

Additionally, many legislators are stepping in and have proposed bills that require insurance carriers to pay out for specific claims related to COVID-19. While the insurance industry is arguing that business interruption policies were not designed to handle these claims and may put a severe economic strain on carriers, these developments are still likely to have a lasting impact on the industry.

Moving Forward

Going forward, insureds will expect a policy that covers epidemics and pandemics in their business interruption coverage. Carriers will need to adapt their products and communications to meet these changing demands.

In response, Insurance Services Office (ISO) has developed two new optional endorsements for use with existing commercial property business interruption coverage.

Here’s what you need to know.

The New ISO Endorsements

ISO Endorsement #1

The first ISO endorsement is called Business Interruption: Limited Coverage for Certain Civil Authority Orders Relating to Coronavirus. This new endorsement provides limited coverage for businesses that are ordered to close by a civil authority.

ISO Endorsement #2

The second ISO endorsement covers businesses that close as a result of a civil authority closing or due to the restricted use of public bus, rail, or ferry lines serving the area where the insured’s business is located.

For both endorsements, there is no waiting period. Coverage begins immediately upon suspension of the insured’s operations.

Additionally, both ISO endorsements:

• Attach to a business interruption policy to provide limited coverage for closures mandated due to the coronavirus
• Extend to cover named dependent properties if included in the policy
• Cover income loss if the insured’s business operates from vehicles or mobile equipment included in the policy
• Cover the time period specified in the Schedule
• Are provided on an annual aggregate basis limited to the amount stated in the Schedule

The coverages explicitly exclude the following:

Intentional action by any person, group, organization, or sovereign state to introduce or spread the virus

• Costs to clean, disinfect, dispose of or replace any property
• Costs to disinfect or dispose of any bodily fluids or waste materials
• Costs of testing for or monitoring the presence or absence of the virus
• Loss or expense due to fear of contagion rather than mandated closure or quarantine
• Loss or expense related to the absence of infected or potentially infected workers
• Any fines or penalties

How to Get Started

While these endorsements will most likely become the model for future epidemic or pandemic coverages, it’s up to carriers to decide whether to use them in the current situation or not.

If you offer these endorsements, it’s important to remember that ISO has not filed them. This means that insurers will need to make the appropriate regulatory filings on their own.

As a certified ISO partner, GhostDraft can help you learn more about the new ISO coverages and how to implement them effectively. If you are not yet a GhostDraft client, ISO has also made the endorsements available to ISOnet customers. However, these endorsements are not published in the Commercial Property portfolio and require a separate purchase.

To learn more about all the recent changes in the insurance industry and how we can help you stay ahead, visit the GhostDraft Resource Center.