COVID-19 has introduced a number of complexities into everyone’s daily lives, including significantly complicating the claims process for many insurers. Under social distancing restrictions and precautions, many insurers have seen increased reluctance to allow adjusters access to insured properties for inspection. Although some adjusting work and damage assessments may be done remotely — and insurers already use virtual inspection technology including drones — concerns about COVID-19 infection related to in-person inspections pose a challenge for insurers who must comply with their duties to reasonably and expediently investigate claims.
In many states, in fact, insurers are required to investigate, negotiate and settle claims promptly, sometimes with specific deadlines imposed by the state’s insurance code. If an insurer fails to comply with these requirements, it may face regulatory implications or litigation for bad faith or unfair claims practices. For example, in Illinois, an unreasonable delay in settling a claim may subject the insurer to statutory punitive damages. On the other hand, many insurance policies impose a duty upon the insured to timely report their claim and to permit adequate access to the insured property so that the insurer may complete its inspection. If the insured fails to do so, they may be in violation of the policy — which can then prevent or limit coverage.
Because of these competing duties, where both the insurer and the insured are unwilling or unable to complete the claim investigation process due to concerns about COVID-19 exposure, it is likely that if such circumstances give rise to litigation, courts will have to consider the facts surrounding each delay. This in turn evokes the question of whether delays due to COVID-19 and property access will always present issues of fact, thus evading review on a motion to dismiss.
Although some claims might be suited to virtual adjustment with either photos taken by the insured or by drones, some claims may require an in-person inspection in order for the damage to be adequately investigated. Courts will likely increasingly be presented with the competing factual issues of whether the insured was reasonable in denying access to the property, whether the insurer acted reasonably in assessing the claim despite the concern of contagion, and whether there were other methods of inspection reasonably available to the insurer. Over the coming months and years, courts are likely to encounter these issues with increasing frequency.
Regardless of the potential implications for litigation, one thing is clear: COVID-19 has and will continue to influence and impact all aspects the insurance industry, from policy sales to claims handling. As the virus continues to impact daily life worldwide, insurers will continue to adapt to the changing circumstances. Only time will tell the extent to which concerns over COVID-19, or perhaps a future contagion, will impact the claims investigation process.