No more than a sneeze: Insurance and H1N1
By Christine Barlow
As the world takes great interest in the progression of H1N1 into a possible pandemic or just a burst of end of season flu, the thoughts of FC&S staff naturally turn to insurance. What kind of coverage, if any, is available for someone who gives another person or colleague the flu? What about businesses that could infect employees or customers? There are many issues to look at, and even if H1N1 isn't the next 1918 flu, it never hurts to be prepared.
Workers compensation provides coverage to employees for injury caused by accident or disease that is caused or aggravated by the conditions of employment. In order for H1N1 to be claimed under workers compensation, the employee will have to 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. If an employee has to work within six feet of other employees for eight hours a day and it can be shown that an employee with 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 business owner's liability
The Businessowners Liability form for this type of loss mirrors that of the Commercial General Liability form. 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 defined term on the policy. 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, but theoretically, it would be covered. The standard duty to defend exists.
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 proved.
Predictions for a true pandemic estimate that forty 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 is not a covered cause of loss, and it does not physically damage the premises; therefore, there is no business interruption coverage.
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. The policy excludes communicable disease that causes injury if the disease has been transmitted by an insured. While 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, 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 H1N1 is viral and can be transmitted through the air; whether or not the exclusion would stand for the transmission of H1N1 from person to person remains to be seen.
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 wasn't any exposure to another source of infection.
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 shut down.
With the H1N1 starting in a certain country, travel immediately becomes an issue. This brings Trip Cancellation and Interruption Insurance into use. 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, the funds returned. As always, policies vary so reading the language is important.
While property and casualty insurance isn't 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 aren't getting processed. Policies may have to be issued regardless of whether they fit the guidelines if the carrier can't issue them within the underwriting window. This could affect a carriers' 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. The economic issues that affect all industries are more of an issue than insurance coverage issues.
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