The broad impact of the COVID-19 pandemic has dominated much of 2020 and has certainly made its presence known in the insurance industry. Across the world, insurance carriers are modifying policies for renewal after responding to risks, some previously unknown, that have come to light only after facing scenarios in response to the pandemic. MCIT is introducing just three changes to its core coverages in 2021, all of them necessitated in some degree by the pandemic.
Communicable Disease Exclusions
MCIT prides itself on offering a broad scope of coverage that responds to the core functions of its public entity members. However, the MCIT Board of Directors also has a long-standing practice of providing property and liability coverage that is fully backed by reinsurance partners.
Each year MCIT secures the most advantageous and cost-effective reinsurance that serves as a financial backstop when faced with large, sometimes catastrophic losses. Reinsurance is necessary to protect the financial strength of the Trust.
To be aligned with the coverage provided by its reinsurance partners in 2021, MCIT is introducing property and liability exclusions that preclude coverage for claims arising from a communicable disease.
Property Section: Generally the exclusion precludes coverage for loss, damage, costs and expenses incurred by a member to clean up, detoxify, remove or test for a disease, including a virus, bacterium, parasite or other organism when it is in, on or affecting covered property.
Liability Section: In the context of a member being sued by a third party harmed by a communicable disease, this exclusion precludes coverage for claims alleging wrongdoing on a member’s part to:
- prevent the spread of a disease.
- test for a disease.
- report a disease to authorities.
- supervise, hire, train or monitor others who may be infected with and spread a disease.
Medical Facilities Exclusion
Effective in 2021, MCIT is adding clarity to the exception to the medical facilities exclusion. MCIT’s liability coverage contains an exclusion for claims arising out of a member’s ownership, operation, control or direction of a nursing home, hospital or any other facility where overnight bed care is provided.
These facilities present medical malpractice type exposures that are best covered by specialty insurance policies outside MCIT. In 2006, the MCIT Board approved an exception to this exclusion in response to members creating plans to develop mass dispensing clinics during public health emergencies.
The exception allowed general liability coverage for claims arising from these facilities during a statutorily declared emergency. The changes for 2021 are in direct response to member questions arising from Governor Walz’s declared peacetime emergency arising out of the COVID-19 pandemic and the potential that members may need to create or modify medical facilities in response to the emergency.
It is important to note that although this exception broadens liability coverage for the premises itself, there remains no coverage for claims arising from the administration of medical care by practitioners of the healing arts.
MCIT introduced its “Cyber Suite” coverage package in 2017 that is fully reinsured through Hartford Steam Boiler (HSB). Noncounty members receive a $50,000 coverage package and counties a $100,000 coverage package, with all members having the ability to request increased limits up to $1 million.
Because of adverse claim activity targeting their public entity clients such as MCIT, both in frequency and severity, HSB has significantly altered the coverage limit structure for 2021. This results in less coverage for members at all levels.
Instead of the current structure that provides a separate aggregate coverage limit for each of the five towers of coverage (for example $100,000 per tower), in 2021 all five coverage towers will share a single annual aggregate coverage limit. In addition, the coverage limit will be divided equally between the two first-party coverages and the three third-party coverages. The scope of coverage, in terms of what is and is not covered, does not change.
Upon reviewing MCIT’s loss history and considering the increased cost of coverage for 2021, the MCIT Board of Directors voted to increase the coverage level for county members from $100,000 to $250,000 in 2021. To facilitate this change, HSB has agreed to waive the underwriting questionnaire requirement normally required at that level of coverage.
Noncounty members will remain at the $50,000 level. All members may request increased limits before the end of the year.
More information is forthcoming about the change in coverage limits and the ability to request increased limits, with additional information about all 2021 coverage changes presented during the annual coverage review in January.