Business Interruption

In most policies, business interruption coverage will only pay out if there has been a direct physical loss under the property section of the policy.  In the case of Coronavirus here are some things to think through:

• Some US courts have ruled that contamination which has left a property uninhabitable can be considered direct physical losses.
• If policies have contingent business interruption coverage, covering losses at third parties, these are typically triggered by direct physical losses, so a supplier being shut down due to the coronavirus will not be considered sufficient.
• Some policies may have coverage for ‘Denial of Access’ or for situations where ‘Civil Authorities’ prohibit access to a premises, but policy wordings vary.
• Some syndicates at Lloyd’s were writing standalone infectious disease BI policies targeted at the hotels/leisure/tourism sector and healthcare sector. We are told that they are no longer quoting at all. Other non-Lloyd’s markets are reportedly open to quoting, but due to the sudden expanded interest, premiums of $250,000 and upwards should be expected, so this will not be an option for the faint of heart. 
• This market could well expand after the current Coronavirus situation stabilizes.

Event Cancellation Insurance

We’re starting to see governments enforce the cancellation of events, particularly large music festivals, such as South by Southwest, and quite a few other major events for the 2020 calendar.

• In recent weeks, all new event cancellation policies have included a Coronavirus exclusion. 
• It is still possible to get quotations to include ‘Communicable Diseases’ (excluding the Coronavirus) but we advise a close inspection of the coverage details. 
• The policy may not pay unless the venue or event is cancelled by a government or a local authority.
• If the Insured chooses to cancel the event for economic reasons, or out of a sense of precaution, the policy will not pay.

Defense Base Act (DBA) Workers Compensation

All US contractors and subcontractors who work on military bases overseas are required to buy Defense Base Act Workers’ Compensation insurance.  Regarding disease, a DBA policy states “Bodily injury by disease must be caused or aggravated by the conditions of your employment.”  Courts have generally taken a broad view of what should be covered by DBA laws and by extension, DBA insurance. 

• In recent weeks we have seen most DBA carriers indicate that they would pay claims for illness caused by the Coronavirus providing the evidence pointed to the affected employee catching the disease in the course of employment outside the country. 
• We have heard of one carrier stating that they wouldn’t pay Coronavirus claims, just as they wouldn’t pay claims for the common flu.
• An interesting case study can be found on Strong Point Law regarding a DBA claim that may set legal precedent.

Foreign Voluntary Workers Compensation

Policies typically cover disease caused or aggravated by employment outside of the US.  In addition, policies cover endemic disease. Malaria is a classic example of an endemic disease in various parts of the world.

An insurance company could take the position that:

1. An employee contracting the Coronavirus outside the US while on business was not caused or aggravated by employment (using the example of not paying for flu or the common cold)

and

2. Coronavirus is not an endemic disease since it is not typically found in that (or any) region of the world

Our hope is that If an employee contracts the disease while outside of their home country, while on business travel, it should be considered ‘caused or aggravated by’ their employment. We hope to see insurance companies backing claims, but until then, only time and possible legal battles will clarify every carrier’s position

Personal Accident, Business Travel Accident, and Evacuation

Personal Accident and Business Travel Accident policies are excellent supplementary medical options as we all know. Most of the medical claims that may come under these sorts of policies will likely be covered. Evacuation extensions or policies, however, are a different animal entirely that only trigger in specific situations. Insurers working with crisis management companies to evacuate their clients may run into major difficulties. In situations such as Coronavirus, this becomes nearly impossible for two main reasons:

1.     Evacuations will be subject to the approval of authorities in both the originating and receiving country and subsequently become logistical nightmares. As soon as governments become involved, for example Italy restricting travel, it becomes almost impossible for these companies to perform evacuations.

2.     Evacuations are generally only performed because of a dire situation, such as needing medical care that cannot be provided locally. A client wishing to be home due to panic will likely be rejected.

Reaching out to a crisis management group could be a good place to receive advice. We’d recommend checking with your own carriers to learn more about how they may plan to respond.

As this epidemic continues to spread, please stay informed by checking the WHO and CDC websites regularly. You can also join us in compulsively refreshing John Hopkin’s live heat map.  As the situation continues to change at breakneck speeds, we will send any additional updates out as we receive them. If you have heard from any carriers, insureds, or have any industry news, please reach out, we’d love to learn more.