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Recent concern regarding the COVID-19 (coronavirus) has generated much public attention and has caused a significant change in travel, personal interactions and in guidelines prescribed by health officials on how to address this growing threat. As a result of this concern, I was recently asked how the Corona Virus would impact the insurance industry.

I have given this some thought and am prepared to share a few of these observations.

Let’s face it, it is only matter of time before someone in the vast field of American Litigant Wannabees, that someone will sue a restaurateur or movie theatre owner or whatever business when that person has obtained this deadly virus. I personally expect lawsuits against cruise ship companies to appear instantly.

Does Your Insurance Cover Corona Virus?

Business owners will want to insure for such potential events by adding endorsements to their policies which might come in several different forms. But here is the question: do environmental insurance policies cover losses arising from biological contaminants? There are a number of concerns, however, that the business owner will want to asses.

To fix insurance coverage gaps for losses associated with biological contaminants insureds will need to convince the underwriters of standard property and liability insurance policies to remove the coverage restrictions for bacteria–related losses or these same insureds will need to purchase an environmental insurance policy that actually works for biological contamination. Environmental insurance policies do have limitations, however.

In order for fungi, bacteria, or viruses, including the Corona Virus to be insured in the environmental insurance policy, all three need to be referenced as defined pollutantsin the definitions section of the policy. Including microbial matter as a defined pollutant in an environmental insurance policy which would encompass all types of fungi/molds/bacteria/viruses with fewer words and work just as well.

There are a number of hurdles to get over before there would be coverage for losses arising from the Corona Virus.

1) In property insurance policies, it can be difficult to show that there has been a direct physical loss arising from an insured peril in order for coverage to apply to a loss event associated with a virus.

2) General liability policies also have coverage glitches for losses caused by a virus. In the insuring agreement in the general liability policy, there needs to be an accident that leads to the loss. Where is the accident with a virus outbreak.

3) An endorsement that eliminates coverage for communicable diseases would apply to a virus outbreak.

By supplementing standard business insurance with a targeted policy for (for instance) food borne illness breaks, businesses such as restaurants might be assured that their costs will be covered.

Insurance for losses arising from fungi, mold, bacteria, and viruses is not reliable coverage in standard property and liability insurance policies. Although fungi and bacteria are now specifically excluded in most liability insurance policies, and sublimited in property insurance policies, it is unusual to see viruses as specifically defined “pollutants” in those policies. Therefore, there may be remnants of coverage for losses associated with a virus in general liability and property insurance policies that would not be there for fungi and bacteria contamination.

This is something business owners will need to discuss with their insurance brokers and agents. It would be best to begin that process now.