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Coronavirus advice: Insurance

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Whilst many remain sceptical about how promptly COVID-19 was first reported, the World Health Organisation says that the reporting at the end of December 2019 allowed many countries to take early steps to prepare for further cases of COVID-19 and to minimise its spread. Notwithstanding the position taken by the World Health Organisation and the initial containment within China, the speed at which COVID-19 has spread, now to over 70 other countries and at a rate faster than the more deadly MERS-CoV virus, has suprised many. The rate of spread has led to significant disruption to commerce and supply chains and this will necessarily impact retail and commercial insurances. We touch on some of the commercial lines of insurance likely to be affected in this note.

In broad terms, property and business interruption insurance insures the loss of revenue due to impacted operations as a result of property damage. The current view is that standard property and business interruption insurance policies are unlikely to be triggered by COVID-19 due to the requirement in such policies for there to be damage to property in order to trigger coverage. This raises interesting debates as to when an item is considered ‘damaged’. It has been suggested that there may be cases where the virus is transmitted through contact with tangible objects, for example, surfaces in medical facilities or airline tray tables. This may raise questions as to whether such surfaces have suffered damage or have been contaminated, as some property and business interruption insurance policies may extend the definition of damage to include contamination of the insured property. We have seen cruise line operators who have been forced to quarantine entire vessels and many property and business interruption insurance policies contain extensions for closure due to, amongst other things, infectious or contagious disease. So where the hurdle of proving ‘damage’ can be overcome, there may be claims for coverage under such extensions. 

Another line of insurance likely to be impacted by the spread of the COVID-19 virus and which protects against loss of revenue is event cancellation/contingency insurance. This type of policy, in broad terms, insures the loss of revenue and expenses caused by the insured perils typically, cancellation, abandonment or interruption of and to the insured event. Policy wordings vary but many event cancellation policies exclude loss caused by ‘communicable diseases’ or the threat or fear thereof.  Some policies condition this exclusion on the particular disease being designated as a ‘pandemic’ by the World Health Organisation. At the time of writing, no such designation has been made despite the COVID-19 virus being widespread. The spate of cancelled events ranging from sports and culture to the restriction in business travel is likely to generate a number of claims under event cancellation policies.

Liability insurance is likely to come into the spotlight. Take the situation of a hotel which has guests who have contacted the virus. Where this spreads to other guests, is the hotel at fault? This may depend on what measures the hotel took to identify affected guests and to isolate them. With popular hotels attracting guests from around the world, it is becoming more common to see claims by guests against the hotel operators which may trigger coverages under liability policies. Issues will arise with employer’s liability insurances. There have been a number of instances of health care workers contracting COVID-19 during screening and attending to affected patients. The case for coverage in these instances is likely to be more straightforward where the employee concerned has been exposed to patients who have contracted COVID-19 whilst performing their job. Other situations may not be straightforward as it may not easily be proven that a worker has contracted COVID-19 as a result of their employment rather than from some other source unconnected with their employment.

Marine hull and cargo policies are fundamentally property policies and in the main, loss of or damage to the property insured is required to trigger coverage. Whilst there may be similar debates to those under business interruption policies where it is necessary to establish ‘damage’, it appears unlikely that the COVID-19 will trigger claims under the marine hull/cargo policies as it may be difficult to identify an insured peril under these marine policies which would be triggered by the outbreak.

The position with COVID-19 is fast evolving. Should you have any specific insurance related queries related to COVID-19, please get in touch with your usual contact at Ince.

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