Liberty Mutual’s Two-Faced Strategy in the COVID-19 Pandemic

Does Liberty Mutual, the global insurance company headquartered in Boston, really want to help those suffering from the pandemic’s economic fallout? On one hand, the $43 billion corporation has touted its own donations to Boston nonprofit organizations. But at the same time, a wave of lawsuits suggests the insurer’s business practices are taking a devastating economic toll on small businesses by denying its customers’ pandemic-related claims. 

Among the lawsuits is a class action brought by The Gardener, a California home and garden store whose owner says Ohio Security Insurance Company, a Liberty Mutual subsidiary, denied her business interruption claim. Other suits against Liberty Mutual entities include those filed by a Kentucky doctor’s officeChicago salon,  and Pennsylvania dental practice, as well as by the Choctaw and Chickasaw nations.  In these cases, businesses paid regular premiums with the expectation of coverage in the case of a calamity. Alta Tingle, The Gardener’s owner, said “We thought that by purchasing business interruption insurance from Ohio Security Insurance Company that they would help us navigate difficult situations like the current crisis.” But now plaintiffs like Tingle say Liberty Mutual has refused coverage–including by invoking the fine-print  “virus exclusion” language. Tingle and others say it was shut-down orders, not the virus, that interrupted their business.  

In many industries, small businesses have been going under as a result of social distancing requirements to protect public health.  Insurance—paid for by owners with crisis protection in mind—could help them remain open. Liberty Mutual’s denial of their claims on the basis of the virus-exemption clause puts its own short-term financial interests first, and threatens to worsen the long term effects of the stay-at-home orders. United Policyholders, a non-profit advocating for insurance consumers, has called for insurance companies like Liberty Mutual to stop blanket denials of COVID-19-related claims. Amy Bach, a representative of United Policyholders, said “We all want to feel like insurance is worth paying for, and when you have a situation like COVID it makes a lot of businesses wondering: why was I paying for insurance all these years when I’m teetering on losing my business entirely, and my insurance telling me it’s not covered?”

Meanwhile, Liberty Mutual is angling for positive press attention for their donations to COVID-19 relief efforts, including $15 million in aid to Boston-based groups. But how much is that $15 million compared to what countless small businesses may be losing when Liberty Mutual denies their claims? This kind of opportunistic insurance practice is a serious threat to economic recovery as we continue to grapple with the pandemic. Small businesses and their owners deserve to be protected from business lost as a result of government ordered shutdowns. Liberty Mutual’s behavior is a clear example of the need for greater consumer protection and public oversight over the insurance industry. In fact, legislation has been filed in Massachusetts that would limit insurers’ denials of business interruption claims. 

It appears from the recent lawsuits that Liberty  Mutual—and other giant corporate insurers—may not be that interested in helping people through the pandemic when it affects their bottom line.  These failures underscore the critical importance of robust, publicly-funded pandemic relief programs to support our reopening and recovery in a way that is transparent and equitable. And to fund those, we need wealthy corporations to finally pay their fair share through progressive taxes. Our small businesses, our communities, and the public good depend on it.

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