The TT does not stand for troubled times, although the TT Club has seen plenty.
The TT stands for Through Transport, referring to the insurer’s customers in shipping, freight forwarding and logistics. The TT Club says it insures 80% of all maritime containers and has an insurable interest in more than 45% of the world’s top 100 ports.
Founded in 1968, the TT Club, with a U.S. office in New Jersey and locations in London, Hong Kong and Sydney, has served clients through the severe acute respiratory syndrome (SARS) pandemic, 9/11 and the financial crisis of 2008-09. Dan Negron has been with the TT Club through them all.
“In years past we’ve had SARS and MRSA [methicillin-resistant staphylococcus aureus] and various others, but certainly not the scale we’ve seen here” with the COVID-19 pandemic, said Negron, the TT Club’s senior underwriter for the Americas. “The last pandemic that was the scale we see here goes back to the Spanish flu [in 1918]. … Certainly in my career I’ve not seen anything like this and I’ve been with the TT Club over 30 years.
“It’s something that affects the insurance industry. It affects all industries. It makes us sit up and think about how business has been conducted up until this point and whether business needs to be conducted a little bit differently, whether we need to make changes,” he said.
Negron said the past nine weeks have been incredibly busy at the TT Club.
“People have decided for some reason that they want to go out and shop their insurance,” he said. “Before this whole COVID-19 issue arose, we were seeing a bit of a price hardening in the market. Markets go through cycles — hardening and softening cycles — when premiums are high and low. Over the past couple of years, events that have taken place have had an effect on the market in the sense that the premiums charged by market insurers had tended to go upward. I think that has people wanting to go out and shop [insurance coverage].
“We have had a very significant increase in the number of inquiries that we have received. You would think that people would want to sit tight, keep things kind of status quo. Yet they’re shopping. Go figure. This is the way the world is,” Negron said.
In addition to cost, clients want to talk about coverage.
“People ask questions, obviously, about their cover, how it responds in situations like the one we’re facing now. There have been a number of articles written in the legal and insurance circles about whether a liability policy will respond, whether a property policy will respond in a situation like this. That is another concern people have on their minds, whether their insurance is going to respond in a special kind of circumstance like we’re facing now,” Negron said.
Business interruption became a hot topic as the coronavirus pandemic first caused manufacturing shutdowns in China and then distribution center and store closures around the world.
“Typically business interruption as a general proposition flows from some sort of damage to the premises. Of course COVID-19 doesn’t cause damages to premises. Therefore the logical conclusion would be business interruption wouldn’t be covered because there wasn’t damage to the premises,” Negron said.
Business interruption clauses may be just one aspect of the insurance industry that could change as a result of the pandemic. Six states — New Jersey, New York, Massachusetts, Ohio, Pennsylvania and Louisiana — have introduced legislation that would require property insurers to pay COVID-19-related business interruption claims.
“Just like on the legal side, the insurance profession needs to be cognizant of circumstances that affect its [policy coverage] and needs to be in a position to address those kinds of scenarios,” Negron said.
There have been many stories of crew members stuck on ships and unable to go ashore — or go home — because of travel restrictions instituted during the coronavirus crisis. Although the situation is sad, it’s a governance matter, not an insurance issue, according to Negron.
“I think it’s been taken into account by public authorities that there’s an overriding need to protect the general public, and so it was unfortunate that individuals had to be out for long periods of time because ports or states or governments refused to allow the ships to dock,” Negron said. “Obviously the United States has had a significant number of cases and a significant number of deaths as a result. The steps that have been taken have been to protect the general public.”
Some industries have fared better than others during the pandemic, he said.
“The ‘winners,’ if you will, are courier companies. They’re the ones involved in delivering goods to the final destination. The need for them is growing pretty significantly, so these companies, as a general proposition, have done fairly well, comparatively speaking. Those who are in the international freight-forwarding business, those who do international trade-type work may not be faring as well as others,” Negron said.
“We have had some requests for relief from premium payments from a number [of clients] that are not in the winner segment, if you will, and the Club is cognizant of difficult situations and we try to accommodate them to the best of our ability — extend payments, make other accommodations for them depending on what their individual needs are. We take them on a case-by-case basis as every operator is unique. It is a situation where some have fared better than others. It just depends on what sector of the industry they’re in,” he said.
Negron remembers getting similar requests during the 2008-09 financial crisis. “But I personally have seen a larger number of requests this time around,” he said.
Coverage questions haven’t really changed that much.
“Is cargo covered? Is there a liability situation? Is there a bodily injury that’s covered? One of the biggest policy issues that we have in the United States is the over-the-road liabilities, where property brokers, those who are an intermediary between a shipper and a trucking company, are named in a lawsuit when the trucking company is involved in an automobile accident and the broker is named in a lawsuit,” Negron said. “That has been and continues to be a very significant issue, certainly for the transportation broker community.
“Over the past maybe 10 years or a bit more, there has been a rise in the visibility in the cases that have been asserted against property brokers in automobile accidents,” he continued. “There have been a number of insurers that have actually backed out of the market because they are not prepared to take on these automobile-type claims.
“Because there has been a reduction in the number of insurers out there prepared to insure this type of risk, we have seen a fairly significant number of inquiries looking for cover. That was the case before COVID-19 and continues even today,” Negron said, adding that he had just received “nine new inquiries, all of which want to have some vicarious liability type of cover.”
Nuclear verdicts — jury awards of more than $10 million — have increased, according to FreightWaves research, and driven a number of carriers out of business.
“We have a right to a trial by jury and jurors can be unpredictable. Depending on the jurisdiction, they can be very pro plaintiff. In their minds, here you have an accident that has caused very, very significant injury or perhaps even death and someone should pay for this — this is the mind of the juror, someone should be held responsible. As a general proposition, the thought is, ‘Well, insurance companies, that’s what they’re there for,’” Negron said. “Their sense of justice dictates that somebody should pay for this, somebody’s insurance should pay for this, and that perhaps leads to a rise in litigation and a rise in the number of people being named in a lawsuit. If you throw enough items up against the wall, something is bound to stick. You name multiple defendants, it’s very possible something could stick against a particular defendant.”
He said there’s certainly the potential for a rash of lawsuits associated with the coronavirus.
“You can’t stop anyone from filing a suit against someone. There is always the potential for an increase in lawsuits. There are defenses that are available to any parties such as force majeure — something that’s beyond the control of a party. That’s to be seen as to how these lawsuits are going to pan out. Will there be lawsuits? I would anticipate there will be lawsuits. It will be interesting to see how it all plays out depending on who is making a claim for what and against what particular party,” Negron said.