Nat Cat Business Interruption Claims: How does Covid-19 compare?

Author: Sean Bissey Date: 06.26.20

Nat Cat Business Interruption Claims: How does Covid-19 compare?

To compare the impact of Covid-19 with that of other recent catastrophic claim events within the property insurance industry, I analyzed business interruption claims in federal courts from 2009 through the present day using LexMachina’s Insurance Litigation Analytics.  My results appear in the graph below.

BI claims over time showing nat cat and Covid 19 spikes

This graph shows (a) the number of business interruption cases filed in or removed to federal courts, by quarter, during the years 2009-2020 and, (b) beginning in 2014, the rolling, previous five-year average of business interruption court cases.  (I selected 2009 for the initial year because that is the earliest year for which Lex Machina has the complete universe of federal cases.)

As the graph shows, previous natural disasters produced noticeable spikes in the number of business interruption claims in federal court. But none of these spikes is as dramatic as that for Covid-19.  Covid-19 has already produced more “excess” business interruption cases than Hurricanes Ike, Irma, and Harvey and Superstorm Sandy combined. Notably, the graph shows that filings typically do not reach their peak until at least a year after the catastrophic event. Hurricane Ike, for example, made landfall in September 2008. Of the 180 federal cases filed, 33 cases were opened in 2008/2009, while 150 were opened in 2010/2011. This could indicate that we are just seeing the first wave of these business interruption claims. This is especially worrying considering Q2 filings of business interruption claims are already more than five times the normal level.

Unlike previous natural disasters, the impact of COVID-19 is not limited by a regional zone of impact.  This national character is reflected in the federal case filings.  The top five courts for Covid coverage cases range from the E.D.Pa. to W.D.Wash.  By contrast, Hurricane Ike caused spikes in business interruption claims in the S.D.Tex. while Superstorm Sandy caused a sharp rise in these case type filing in the federal district courts of New York, consistent with the geographic impact of those storms.