Are the risks inherent to COVID-19 covered by the insurance policies?

COVID-19 and the official pandemic declaration by the WHO is a novel situation, so you should carefully review your insurance policy to understand whether related insurance claims correspond to risks covered by the policy.
It is important to check if there are no exclusions that would exclude you from the scope of the coverage. Exclusions can be more or less detailed, with more concrete or more general reference to diseases, epidemics or pandemics. It is important to consider how the terms used intersect with the guidelines issued by the WHO and other official health authorities.

A detailed analysis of the policy conditions is also essential to assess the deadlines and contents for notifying the insurance company of the claim, as well as the means of proof required for exercising your rights.

 

What are the impacts of the exceptional and temporary regime relating to insurance contracts, approved by the Decree-Law no. 20-F/2020, of May 12?

The measures approved by the exceptional and temporary regime relating to insurance contracts aim to protect policyholders, insured and beneficiaries, in the context of the COVID-19 pandemic, by establishing measures that focus on the payment of the insurance premium and mirror in the ongoing legal relationship the effects of the temporary reduction of risk in insurance contracts resulting from the significant reduction or suspension of the activity.

First, the premium payment regime is made more flexible, converting it into relatively imperative regime, that is, allowing to be agreed that the coverage of risks no longer depends on the prior payment of the premium. Exceptions to this measure are life insurance, crop and livestock insurance and insurance covering large risks.

Secondly, it is established that, in the absence of agreement between the insurer and the policyholder, and in the event of non-payment of the premium or fraction thereof on the respective due date, the guarantees of the compulsory insurances are maintained for a period of 60 days from the date on which the premium or fraction thereof is due. If the policyholder fails to pay the premium at the end of the 60 days, the contract shall lapse and the policyholder shall remain subject to the obligation to pay the amounts due to the insurer, correspondent to the period during which the insurance was in effect. The outstanding amount may be deducted from any amounts due by the insurer to the policyholder, in particular in the event of a claim, during the period in which the contract is in effect.

Finally, the policyholders who carry out activities that are suspended or whose establishments or facilities are still closed due to exceptional and temporary measures adopted in response to the COVID -19 pandemic, or those whose activities have been substantially reduced due to the direct or indirect impact of these measures (a substantial reduction in activity will occur when the policyholder is in a business crisis situation, including when there is an abrupt and sharp drop of at least 40 % in invoicing), may request that these circumstances be reflected in the insurance premium that covers business risks (except if these are large risks insurances), applying, with the due adaptations, the provisions of the risk reduction regime, provided for in the legal regime of the insurance contract, as well as request the fractioning of the payment of the premiums relating to the annuity in progress, without additional costs.

Where the premium has been paid in full at the beginning of the annuity, the amount of the premium reduction by application of the preceding paragraph shall be deducted from the amount of the premium due in the subsequent annuity or, in the case of an insurance contract that is not extended, reversed within 10 business days prior to its termination, unless otherwise agreed by the parties.

The measures of Decree-Law no. 20-F/2020 of May 12, as amended by the Decree-Law no. 78-A/2020 of September 29, entered into force on May 13 and will remain applicable until March 31, 2021.

We also emphasise the disclosure obligations regarding the measures taken by the insurers under the Decree-Law no. 20-F/2020 of May 12, as amended, towards the clients, the market and the Insurance and Pension Funds Supervisory Authority (ASF), which terms were specified under the ASF’s Regulation no. 8/2020-R of July 23.


Work Accidents

  • The infection resulting from the virus is not an accidental event, therefore, in principle, it is not covered under the work accidents insurance. An infection by COVID-19 in a work context (e.g. infection of healthcare professionals) has already been recognised by the World Health Organisation as an occupational disease and as such is excluded from the work accidents insurance coverage.
  • For employees carrying out their activity through teleworking, by indication of a public authority or of the employer, the cover of a work accident will depend on whether the applicable requirements are met. For this purpose, the employer must document the telework, including keeping an internal record with (i) the names of the workers, (ii) the dates and (iii) the authorised times, (iv) the addresses were the teleworking will be provided and (v) the prior authorisation of the employer.
  • Insurances covering the recovery period of employees infected by COVID-19 have already started being offered on the market. These policies cover the period after the discharge from the hospitals’ intensive care units. The way these covers work differ from the traditional cover of a work accidents insurance and requires a case-by-case analysis.

Personal Accidents

  • As stated above, the infection resulting from the virus does not correspond an accidental event and therefore, in principle, is not covered by a personal accidents insurance.

Life Insurance

  • In general terms, life insurance policies do not contain any exclusion related to pandemic or epidemic event, so, in the event the infection by the virus leads to the death of the insured person, the policy’s guarantees will apply, subject to the exclusions agreed between parties.

Health Insurance

  • In most cases, the insurance will cover health expenses that precede the diagnosis of the infection by COVID-19. Regarding the COVID-19 diagnose test, it should be assessed the relevant insurance company’s policy regarding payments or copayments of this test.
    Expenses related to treatment, including hospitalisation by COVID-19, will generally be excluded from the cover due to the declaration of pandemic. Moreover, according to the recommendations of the General Directorate for Health (Direção-Geral da Saúde – DGS), the private healthcare players should signal and convey to the National Health Service (Serviço Nacional de Saúde – SNS) the infected patients with COVID-19, and the SNS will take responsibility for their treatment.

Motor Insurance

  • There are no clauses excluding or limiting the guarantees due to the mere declaration of the state of emergency or pandemic as regards to the legal mandatory guarantees.
    Regarding optional guarantees, it is required a case-by-case analysis of the policy to verify whether the pandemic caused by COVID-19 is an exclusion.

Business Interruption Insurance

  • The insurances normally available on the Portuguese market will only cover business interruption losses resulting from the occurrence of a material damage to the insured object (e.g., physical premises of the undertaking, equipment, etc). The interruption of business as result of a pandemic or an epidemic is not a risk traditionally covered.
    Nevertheless, it will be useful to confirm whether the policy cover interruptions caused by a disease outbreak or an administrative order and, if that is the case, whether the pandemic and the state of emergency are exclusions.

Cancellation Insurance

  • Covers for this type of insurances may vary and require a case-by-case analysis. There are cases where the occurrence of a cancellation due to the pandemic or the declaration of the state of emergency is excluded from the scope of the insurance’s guarantees.

Credit Insurance

  • It must be confirmed if the insurance policy excludes the pandemic or the acts of administrative nature that have been adopted by the official authorities to overcome it, from the cover of the resulting financial losses.
    In this respect, it should also be analysed the measures approved by the European Commission on the 19th of March of 2020 establishing a Temporary Framework under the terms of Article 107(3)(b) of TFEU (subsequently extended by an amendment on the 3rd of April), which provide, among others, the possibility of Member States to grant an aid for short-term export credit insurance. The granting of such aid is subject to the proof of the unavailability of private players to provide such guarantees.

 

 

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This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.