Insurance and Viruses – 2020 Update

This article includes copyrighted material of Insurance Services Office, Inc. with its permission.

Updated 2/5/2020

Last revision 2014

In 2012 H1N1 was the medical issue taking the world by storm. People feared a pandemic and what that would do to the economy and society as a whole. In 2014, the feared disease was Ebola: harder to spread, but much more deadly once contracted. As of October 10, 2014, the World Health Organization reported close to 8,399 cases and 4,035 deaths due to Ebola, a nearly 50 percent mortality rate. By June of 2016 the number of cases had jumped to 28,816, with 10,000 survivors and 11,310 deaths. Today, the outbreak is largely diminished in all but a few areas, but in June 2019, the World Health Organization declared the Ebola outbreak in the Democratic Republic of Congo a global health emergency, after new outbreaks of the disease spiraled out of control in 2018.

Fortunately, it is not easy to contract Ebola—one must have direct contact with bodily fluids of an infected individual. It is not spread through the air and not likely to become airborne. Those taking care of the ill are at the highest risk of contracting the disease, which has many hospital staff worried. The affected individual must be isolated and the caretakers properly attired in hazmat suits to avoid any possible contact with fluids. However, there is a twenty-one day incubation period, which caused quarantines and fear among the public.

In 2019, measles broke out in the United States after having been considered eradicated in 2000. There were twenty-two outbreaks in thirty-one states, with a total of 1,249 between January and October, the largest number of cases since 1992 and the second highest  number of outbreaks since 2000. Most of the cases were in people who were unvaccinated or had an unknown vaccination status; 89 percent. Fortunately most of the population has been vaccinated and many of the outbreaks were limited to close-knit communities. 

This year we now have the Wuhan, or Coronavirus.  The first reported case was December 31, 2019. As of January 20, 300 cases were reported with six deaths, and one case in the United States. At first it was thought the virus could be contained in China. Two days later, on January 22, 17 deaths were recorded and cases were up to more than 570. Governments began implementing screening procedures at airports in attempts to control the spread of the virus, and Chinese officials imposed a quasi-quarantine on Wuhan, partly becasue of the approaching Lunar New Year in which many people travel. By the next day outbound trains and bus services from Wuhan were suspended. Singapore cancelled flights to China as did Taiwan. By January 24, 41 people had died from the virus and there were 1,287 confirmed cases of infection. Cases were confirmed in Australia, France, South Korea, Japan, Nepal, Thailand, Singapore, Vietnam, Taiwan and the United States.  Two days later there were at eighty deaths from the virus. As of January 29th countries began isolating travelers from China in order to screen for the virus, in some cases housing them for two weeks, as in Australia. The number of cases double every 6.4 days, on average. There are 195 Americans under quarantine in California, and the base is prepared to accept up to 250 more if necessary. The virus can be spread between humans before symptoms show, making it much hard to contain the virus. The number of infected and deceased increases daily, more and more flights are canceled, and issues continue to develop and spread. 

A side effect of the rapid spread of the virus is the selling out of face masks and other protective gear. Also, China is the world’s largest producer of active pharmaceutical ingredients; disruption in the work environment due to lack of workers because of illness can seriously affect health care throughout the world. While manufacturers have not reported a disruption in the supply, at the rate the virus seems to be spreading it could be entirely possible that a disruption will occur.

As of January 31, some American airlines suspended flights to mainland China, and Americans evacuated from Wuhan were quarantined. At this point, more than 250 people have died, with 12,000 confirmed infections. In the span of thirty days, the virus has gone from one infected person to 12,000. The World Health Organization (WHO) declared a public health emergency, and the United States made the same declaration. The WHO has made only five emergency declarations since 2005; for the pandemic flu in 2009, a polio resurgence in 2014, Ebola in 2014, Zika in 2016, and Ebola again in 2019. The states of emergency are guidance and do not carry the rule of law. As of today, there are 17,228 confirmed cases in China, and WHO reported 146 confirmed cases in twenty-three countries outside China.

As the world takes great interest in the progression of Coronavirus, and any other viruses that may spread across populations, and the possibility of a pandemic, the thoughts of the FC&S staff naturally turn to insurance. What kind of coverage, if any, is available for someone who gives another person or colleague Coronavirus or the flu? What about businesses that could infect employees or customers? There are many issues to consider, and even if Coronavirus, measles, Ebola or H1N1 isn’t the next 1918 influenza, it never hurts to be prepared.

Workers Compensation

Workers compensation provides coverage to employees for injury caused by accident or disease that is caused or aggravated by the conditions of employment. Asbestosis is a disease directly related to working with materials containing asbestos. Ebola is caused only by direct contact, so the cause is easily traceable, making it very easy to claim workers compensation. For instance, nurses who tested positive for Ebola after treating an infected patient in a Dallas, Texas hospital obviously caught it at work. The Coronavirus is not as easily traceable, as it can be spread person to person and a person can come in contact with many people while having no signs of illness. 

Already China is shutting down businesses in an effort to contain the virus. Death benefits are also part of workers compensation coverage. As the virus spreads, deaths from it are rising as well; workers compensation could be hard hit. As is typical of any contagious illness the health care industry is at significant risk, espeically since necessary safety precautions are in short supply. 

In order for a flu or other airborne virus such as cronavirus to be claimed under workers compensation, the employee must show that the virus was contracted at work, versus the grocery store, movies, mall, or other area where one is exposed to the public at large. This is not an easy thing to prove. Unless it can be shown that the employee became infected at work, there is no coverage.

The employers liability section of the policy states that the injury must arise out of and in the course of the injured employee’s employment. What exactly “out of and in the course of employment” means has been discussed in various court cases. In such disputes, a causal connection is needed between the injury and the actual employment, and the jurisdiction will also have an impact. It is easy to prove with Ebola, although not so much with other viruses.

If an employee is required to work within six feet of other employees for eight hours a day and it can be shown that an employee with Coronavirus or H1N1 came to work while contagious and infected a group of employees, a case could be made that their infections were work-related. However, if various employees are in a bowling league together and an employee spreads the flu to other employees on the league, there is no coverage. Simply working for the same company, even if the company sponsors the recreational activity, does not make any illness caught while participating in recreational activities “out of and arising from employment.”

CGL Coverage Form and Businessowners Liability

The Businessowners Liability form for this type of loss mirrors that of the Commercial General Liability form; therefore there is no need for a separate discussion of Businessowners. The Commercial General Liability form provides coverage for injuries or damages the insured is legally obligated to pay under Coverage A. “Bodily injury” is defined in the policy as injury, sickness, or disease sustained by a person including resultant death. The injury must be caused by an occurrence, again a policy defined term. The standard definition of “occurrence” is used, that being an accident including continuous or repeated exposure to substantially the same general conditions. Coverage for employees is excluded, so coverage could exist for patrons of the establishment. There is no exclusion for the spreading of a contagious disease, so if it can be shown that the employee infected a patron, there would be coverage. Again, this is quite difficult to prove with many viruses; the spread of viruses is covered, just hard to prove. The standard duty to defend exists.

When Ebola was an issue some carriers  moved to exclude coverage for any loss related to the Ebola virus, including injury, damage, expense, or cost. Ace Ltd. restricted coverage for companies exposed to certain African countries only, and those exclusions were for manufacture, sale, or distribution of medications or vaccines, failure to provide such medications, complications arising out of treatment, or failure to properly sanitize areas or warn, quarantine, or other safety measures to prevent the spread of the disease. ISO released a circular denoting which ISO policy types contain exclusions for viruses and communicable diseases.

© Insurance Services Office, Inc., 2014

Note that some exclusions are for virus or bacteria—the two are different. Viruses are not bacteria and are different because they include genetic material in their makeup. So, a policy that excludes just bacteria may in fact still have to provide coverage for Ebola, Coronavirus,  and other viruses.

Coverage C of the policy provides medical payments coverage for injury caused by an accident as long as the accident is on or next to the insured’s premises or because of the insured’s operations. Expenses for first aid, necessary medical services, ambulance, hospital or nursing services, or funeral home services are covered. Again employees are excluded, but there is no exclusion for the transmission of a virus from an employee to a customer, as long as it can be proven. 

Business Interruption

Predictions for a true viral pandemic such as H1N1 estimate that 40 percent of the workforce will be absent and that the flow of goods and services will be significantly curtailed. Therefore, thoughts immediately turn to business interruption coverage; business is certainly interrupted, but is there coverage? Unfortunately not. There are three conditions that must exist in order for coverage to be triggered: an actual loss of business income, a necessary suspension of operations during the period of restoration, and the loss must result from direct physical loss or damage at the described premises from a covered cause of loss.

The spread of a contagious illness, Coronavirus, H1N1, Ebola or others, is not a covered cause of loss, and it does not physically damage the premises, so there is no business interruption coverage. With something like Ebola, concerns could arise about staff members refusing to come to work in fear of the disease. How many people might not show up is open to discussion, but it is a hazard that could interrupt day-to-day business. Again, since there is no physical damage to the property, there is no coverage.

Another issue is lack of employees due to not just their own illness but illness of family members; if schools close children may have nowhere to go, and daycares may close as well. Parents will have to stay home to take care of children, causing worker shortages.

Farm

Since H1N1 was first called swine flu because of its connection with pigs, it makes sense to look at the farm policy as well. Pigs can be infected by all three strains of flu that combined to create H1N1- swine, avian, and human. Ebola is a different matter; experts believe it was originally transmitted from bushmeat in Africa. Bushmeat is often monkeys but includes bats, birds, gorillas, other primates, and deer. The problem with eating primates is that the genetic similarity to humans makes some viruses readily transferable between species. It is suspected that Coronavirus originated in snakes. 

The farm policy excludes communicable disease that causes injury if the disease has been transmitted by an insured. The definition of “insured” includes the named insured, family members, partners, officers and directors, employees, or those legally responsible for animals owned by an insured. Swine are not insureds, nor are any bushmeat animals; they are property. The transmission of the flu from swine to humans would not be covered.

Up to this point the communicable disease exclusion has been applied to sexually transmitted diseases, where there is actual contact between the persons. The Coronavirus is viral and can be transmitted through the air; whether or not the exclusion would stand for the transmission of Coronavirus from person to person remains to be seen. Ebola is easily transmissible from human to human, and this is where the policy could come into play.

Homeowners Policy

The homeowners clauses are similar to the ones discussed previously. The policy states that liability coverage is provided for injury caused by an occurrence, which is an accident including repeated or continuous exposure to the same thing. Medical expenses are also covered. The policy then excludes coverage for injury that arises out of a communicable disease by an insured. Again, this has usually been taken to mean sexually transmitted diseases. A pandemic could bring cases into courts that could change the interpretation if it could be proven that the exposure to the insured directly infected the injured party, and there was not any exposure to another source of infection.

Kaci Hickox, an aid worker who, upon returning to the United States after working with Ebola patients in western Africa, refused to submit to a forced twenty-one day quarantine based on the fact that she was currently showing no symptoms; however, other patients did not show symptoms immediately either. If she became symptomatic, everyone she came in contact with would have to be monitored. Making the connection between those infected and their contact with her would be relatively easy. Knowing the facts about Ebola, the expected or intended exclusion could readily be applied; should she spread the virus, it can be stated that she should have known what would happen by coming into contact with others. While not contagious until symptoms appear, her actions show what could happen if someone with a readily transmissible virus decided to break quarantine—the virus could spread exponentially. There is no coverage under the homeowners form for the spread of disease, and a more readily transmissible form of Ebola could at least lead to claims being filed and having to be processed.

So far people have readily cooperated with the current quarantines for Coronavirus. It is different because people may be infectious before symptoms appear, so adhering to quarantines, travel and other restrictions are particularly important.

Civil Authority

Many policies have language that allows coverage if a civil authority has restricted access to the premises. This is property coverage and as such there must be direct physical damage to property at other than the described premises. Therefore, the closing of movie theaters, shopping centers, restaurants, and other areas where people gather are not covered for the interruption in business because of the ordered shutdown. The Government is already quarantining passengers returning from China. With the measles outbreak, some areas were required to stay quarantined unless they could prove they had been vaccinated.  Should it become airborne, or a flu pandemic break out, more quarantines are likely. During the 1918 flu, stores were not allowed to have sales, funerals were limited to fifteen minutes, and health departments distributed gauze masks to be worn in public. Some towns required a signed certificate to enter, and railroads would not let people board trains without one.

Trip Interruption

With the Coronavirus, H1N1 and Ebola starting in certain countries, travel immediately became an issue. This brings trip cancellation and interruption insurance. Policies vary, but coverage is generally provided for the cancellation or cutting short of a trip due to sickness, injury, weather conditions, airline strikes, and other such unexpected events. However, once an outbreak has been identified, any travel insurance purchased will not cover the outbreak. Once declared an outbreak, it is then a known event, and as such is excluded. Some polices do include a cancel-for-any-reason option that allows the traveler to cancel the trip for any reason and get some, but maybe not all, funds returned. As always, policies vary so reading the language is important.

Impact

While property and casualty insurance is not massively impacted by a viral outbreak because of claims, the industry is still affected. Companies have the same issues as other organizations, mainly absentee employees. If the underwriters and adjusters are absent, then policies and claims are not getting processed. Policies may have to be issued regardless of whether they fit the guidelines if the carrier cannot issue them within the underwriting window. This could affect a carrier’s book of business long term, depending on how widespread an outbreak is and how long it lasts. Adjusters are exposed to large portions of the population, therefore precautions need to be taken so that they do not become infected or infect other employees.

With Ebola being so fatal, life insurance policies come into play. The Spanish flu of 1918-1919 killed between twenty to forty million people, and the mortality rate was only 2.5 percent. The Coronavirus is not nearly as fatal but there are still fatalities, and it seems to have a higher fatality rate than the seasonal flu.

Whether it is Coronavirus, Ebola, MERS, flu, or some other virus, a true pandemic can have profound effects among society and affect the insurance industry as well.