Is Gov. Wolf Right That Insurance Won’t Cover Firms That Violate Shutdown?

May 13--Gov. Tom Wolf has been using the state-regulated insurance industry as a cudgel to beat down the grass-fire rebellion by counties and local-business owners chafing against Pennsylvania's coronavirus shutdown order.

"Businesses in counties that do not abide by the law will no longer be eligible for business liability insurance and the protections it provides," Wolf warned in a public statement Monday. "Insurance does not cover things that happen to businesses breaking the law."

"Noncompliant businesses defying the governor and secretary's business closure orders" ought to remember that property and liability policies often "contain provisions that exclude coverage for businesses or individuals engaging in illegal acts or conduct," Wolf's insurance commissioner, Jessica K. Altman, warned in a supporting statement.

Or maybe not. "Altman's press release stating that businesses that open without Gov. Wolf's position could lose their insurance coverage is -- at best -- misleading. I happen to think it is blatantly false," writes Art Boyle, a 30-year Pennsylvania insurance industry veteran and managing partner at Controlled Risk Partners LLC in Downingtown.

"She parses words from the parts of the policy called "Exclusions" to suit the narrative," Boyle said. "The way Ms. Altman is framing her communication is designed to sow fear and support Gov Wolf's shut down order."

But what do policies' illegal-activity and government-authority exclusions mean if not to avoid covering a business that defies a state order?

"Courts generally agree to apply the 'reasonable expectations' doctrine" in deciding whether coverage is expected, "even if the policy wording does not provide that coverage," said Boyle, who is also president of the Delaware Valley Risk and Insurance Managers Society.

So, if the state says to close, but the county or city says it's OK to open, "tie goes to the runner," Boyle said, using a baseball analogy. "Any insurer" would be very unlikely to accuse a business of "operating illegally, if given permission by local ordinance."

Has this coronavirus order of operations theorem been tested in court? Not yet, Boyle acknowledged.

But clauses requiring businesses to comply with "government authority" will protect a business that opens "with full permission of a local county or township, despite the state's mandate," Boyle added.

And if a customer claims injury, in a store shut by the state but reopened under a conflicting county policy, any insurer that tries to "refuse coverage, and hang their hat on Ms. Altman's suggestion that coverage should be denied," should expect to "be accused of 'bad faith' and open themselves up to penalties," Boyle said.

So don't panic, Boyle concluded. "The merits of an individual claim and coverage decisions are between the insured and the insurer, not the Pennsylvania Department of Insurance."

The DuPont Co. continues to break up under CEO Edward Breen, on the theory that what was once the most valuable company in America is worth more in pieces.

The $7 billion planned merger of its largest remaining business group, Nutrition & Biosciences, which puts fatty-tasting compounds in no-fat cupcakes with New York- and Paris-based International Flavors & Fragrances, has advanced with DuPont's naming this week of a management team. Top jobs will go mostly to IFF executives, but DuPont veterans will head or co-head three of the four business groups.

The new company will include a combined Taste & Beverage group ($6 billion in yearly sales), Health & Biosciences (more than $2 billion, mostly from DuPont), a Scent unit ($2 billion, mostly from IFF), and a Pharma group (under $1 billion).

There is as yet no new name for the food and nutrition additives giant, which will be based in New York. The deal is supposed to be done early next year.

IFF owns the flavorings firm Tastepoint, based at predecessor Henry H. Ottens Manufacturing Co.'s former offices on Holstein Road near Philadelphia International Airport. The unit also runs a factory on Decatur Street in Northeast Philadelphia.

DuPont's Nutrition & Biosciences employs about 600 in the Wilmington area. Together, the businesses employ 23,000 worldwide.

IFF boss Andreas Fibig will run the combined company as CEO. DuPont boss Breen will serve as lead director on the new board.

They picked "the best of both organizations," Fibig maintained in a statement.

Past DuPont spin-offs still based in the area include Wilmington-based Corteva (pesticides) and Chemours (titanium dioxide and other commodity materials), Philadelphia-based Axalta (car paints and coatings; the company had been for sale, but said last month it is no longer seeking a buyer); Chinese-owned, Wilmington-based Lycra Corp.; and Exton-based Endo Pharmaceuticals.

Pittsburgh-based PNC stands to collect more than $15 billion as it finally cashes out its founding stake in New York-based BlackRock, the nation's largest investment company with more than $7 trillion in assets, including major employment centers in the Princeton area and Bellevue, Del.

The bank might have made a little more by selling when the markets were stronger. Still, the sale will make PNC the "'Bank of Steel, the most resilient among the big banks," able to lend and invest while others are restricted by the shrinking coronavirus economy, bank analyst Mike Mayo told clients of Wells Fargo Securities.

Mayo is recommending investors buy PNC stock, as the bank is likely to come out of the current crisis larger and richer -- as it did in 2008-10 when it used the financial meltdown to acquire Cleveland rival National City Corp. and other assets at deep discounts.

What will PNC do with the money? Keep paying dividends, extend more loans -- and buy who else? Another bank, such as Citizens Financial Group?

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