Camila Vieira Guimarães
Lawyer at Marcos Martins Advogados
It is undeniable that the insurance market is already suffering a major impact from the effects of the new coronavirus (Covid-19) pandemic, with a successive increase in claims. This impact on the market is generating enormous legal uncertainty, as it is not known how insurers will handle current and future policies, as well as the offer of products and services, with the risk of a medium and long-term scenario of greater litigation, requiring prior analysis of possible discussions.
Although the jurisprudence is timid at the moment due to the short time that has passed since the beginning of the events linked to the pandemic in Brazil, the aim is to make a prognosis of sensitive issues arising from the pandemic that will require the Judiciary to express itself.
The insurance market operates on a forward-looking basis, so claims rates will have a significant impact on existing contracts, either through an increase in the number of claims or the termination of contracts due to the shutdown of various sectors of the economy, as well as a drop in the number of new contracts, as is the case with the automobile sector. The downturn in the automobile market already has a direct impact on the fall in the number of people taking out car insurance, given the fall in people’s consumption of vehicles.
The acquisition of cover under an insurance contract respects the intangibility of the contractual clauses, i.e. the parties must respect the provisions of the contract, the covers and exclusions provided for in the text, so the interpretation of what is covered or excluded is the key to litigation.
In general, insurance contracts do not provide for cover or compensation in the event of a pandemic. Although some insurers have publicly stated that such cover would be provided, regardless of any contractual clause to the contrary, in the face of a possible collapsed insurance market, claims relating to cover are already reaching the courts and many more may arise, and the contractor should be aware of this issue.
The impact of the Covid-19 crisis
As a result of the economic crisis caused by the pandemic, the loss of financial capacity among residential and commercial tenants will directly affect the loss rate of rental guarantee insurance. Some contracts of this type exclude conditions such as inability to pay due to acts of nature or acts of public authorities. The effects of the isolation measures adopted by the Government, as well as the resulting economic crisis and the coverage expected of the insured, are being discussed, an issue that may well be raised in the courts.
As for insurance for loss of profits, understood as those covered in the event of paralysis of the contractor’s business or activity, guaranteeing payment of compensation, there will inevitably be discussion as to the interpretation of the pandemic and its variables in the concept of physical and/or material damage suffered by the insured for the insurers’ recognition of the premium. To the extent that this type of contract is based on the occurrence of physical damage that caused the business to stop operating, social isolation measures alone would not be included in the list of cover, requiring the courts to examine the issue in the medium and long term.
Given the stress the health system is under, it is expected that there will be an increase in claims for the segment of civil liability insurance between medical establishments due to the scale of the spread of Covid-19 and any medical acts carried out.
Data protection
Attention should also be paid to the data protection sector, given that with the urgent need to send work almost entirely to a remote environment, the level of governance is not the same as that of a controlled network, making it subject to an increase in virtual attacks by hackers and, consequently, projecting a possible increase in claims for data protection insurance.
It is important to mention, on the subject of insurance, that Bill No. 2113 of 2020, authored by the Federal Senate and sent to the Chamber of Deputies for a vote, contains restrictive rules, including a ban on insurers denying coverage for any illness or injury, life insurance and permanent disability, due to the new coronavirus pandemic and setting 10 (ten) days from the delivery of documentation for insurers to pay the premium in the event of death by Covid-19.
Finally, it is worth highlighting the current discussions about the possibility of companies using guarantee insurance to replace court deposits.
Guarantee insurance is a product that insurance companies offer to companies to guarantee debts that are being processed in court in the form of judicial deposits in civil, labor and tax cases. In this crisis scenario, in which many companies don’t have the working capital to pay salaries, suppliers or even to continue their business, but have a significant volume of court deposits, some companies have asked the courts to replace these court deposits with guarantee insurance duly regulated by the Superintendence of Private Insurance – SUSEP. Some courts have already ruled in favor of the respective replacement, including the TJSP[1].
In general terms, this article sets out some sensitive insurance issues that may require a position from the Judiciary, given the prospect of a crisis that will hit all sectors, including the insurance industry, and it is hoped that all those involved will adopt a collaborative stance.
Marcos Martins Advogados is always attentive to market discussions related to the needs of its clients, anticipating strategies and always seeking the best solution for their demand.
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[1] TJSP. Agravo de Instrumento nº 2072750-68.2020, Voto nº AI-6.884/20, Relator: Torres de Carvalho, 10ª Câmara de Direito Público, Publicado em 27/05/2020.
