Kentucky childcare centers are 'mad as hell' as insurers reject their COVID-19 claims

Apr. 29--ABC -- Children's Academy in Bowling Green closed March 20 on the order of Gov. Andy Beshear, just like every other childcare center in Kentucky. Then, owner Melanie Barker and dozens of her colleagues around the state who were put out of business by COVID-19 all did the same thing: they filed an insurance claim.

Required to have insurance, many of their policies contained coverage for a "business interruption" caused by "an outbreak of a communicable disease at the insured premises."

They've all been denied.

"I am totally frustrated and so are many other childcare operators in this state who are finding out insurance does not cover this pandemic," said Barker.

Testing for COVID-19 was severely restricted at the time, making it virtually impossible to verify that the disease was present in any particular daycare.

"How do I know if the communicable disease was present in my facility?" Barker asked. "Better yet, how does the insurance company know that the communicable disease was not present in my facility?"

Barker and more than 40 other operators of childcare care centers in the state are sending information about their denied claims to Brownsville attorney Gary Logsdon, who specializes in insurance cases.

"These people are required to have insurance to operate," said Logsdon. "They do and now don't get their claims honored because of something beyond their control. They are mad as hell and I don't blame them."

Daniel Lowe, owner or Big Blue Bird Early Learning Childhood Center in Lexington, said his insurance company told him "COVID-19 was not covered."

He said he has sent his denial to Barker, who is organizing disgruntled childcare owners.

Lowe said he is worried that many childcare centers have been damaged permanently.

"We're getting hit hard by being closed and with insurance not paying up," he said. "But my bigger concern is how are we going to reopen. You can't do social distancing with children. Kids won't wear masks all day. A friend told me masks used to cost $10 for 50 but they are now $50 for 50, and I can't operate at 50 percent capacity."

Sherelle Roberts, a spokeswoman for the state Public Protection Cabinet, which includes the Department of Insurance, said many insurers changed their policies after the 2003 SARS virus outbreak to stop businesses from filing claims for interruptions caused by virus outbreaks.

"All we can do is to tell each business to review your policy. It's policy by policy. We have no control over it," Roberts said.

Beshear, at his 5 p.m. news conference Wednesday to update the COVID-19 situation in Kentucky, said of the insurance problem, "That's upsetting."

David A. Sampson is chief executive for the American Property Casualty Insurance Association, the primary trade group for home, auto and business insurers.

"Pandemic outbreaks are uninsured because they are uninsurable," Sampson told the Herald-Leader in an email.

He said any attempt to retroactively mandate insurance coverage for viruses "would immediately subject insurers to claim payment liability that threatens solvency and the ability to make good on the actual promises made in existing insurance policies."

The trade association has estimated that closure losses for small businesses in the nation with 100 or fewer employees could range from $255 billion to $431 billion per month. It said there is only about $800 billion in total surplus for all of the U.S. home, auto, and business insurers combined, as required by law, to pay future losses for existing contracts.

Kevin Strobo, owner of Busy Bee Academy in Louisville, said he recently learned that his insurer had an exclusion in the policy not to pay for shutdowns due to viruses.

"I never realized that, but whoever thought we would have a pandemic that shut down everything," he said.

Strobo has filed a complaint with his insurer.

Jim Kaiser, who operates All About Kids, a childcare center in Union in Boone County and another in Liberty Township, Ohio, said he had a broken water line in one of his facilities in 2006 and it had to close for a few days.

"My insurance company covered that business interruption but I understand it won't for this pandemic, which is beyond my control and totally surprises me," said Kaiser. "I had no idea it wouldn't cover this."

Kaiser said he will be talking to Logsdon "once my denial becomes official."

Kim Quire, who runs Small Steps Childcare in Louisville, said her insurance claim was denied "because we could not prove a child or staff member was affected by the virus."

"Please tell me how they can do this without any testing," she said. "We closed our doors before there was any testing."

Depending on coverage, annual costs for insurance coverage of a commercial childcare center runs between $1,000 and $1,700, Quire said. Her insurance is through West Bend Mutual in Wisconsin.

Quire said she has lost about $50,000 so far.

On March 25, the National Association of Insurance Commissioners sided with the industry, saying in a statement, "Business interruption policies were generally not designed or priced to provide coverage against communicable diseases, such as COVID-19 and therefore include exclusions for that risk."

Sampson, the trade association's chief executive, said "only the federal government can be the bridge for a crisis of this proportion."

He noted that his group supported recently enacted federal assistance programs that are helping small business.

Quire said she is going to receive about $225 per child from the federal CARES Act for small businesses.

"That will give me about $16,000 with my 72 enrollment," she said. "I'm already out $50,000. Do the math. Am I in the hole or what, and it's only going to get worse."

Gov. Beshear said Monday it's unlikely that childcare centers will be able to reopen until at least June. He said they are the type of places that could increase the spread of the disease, which has killed at least 224 Kentuckians.

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