The news about the COVID-19 coronavirus is growing more alarming by the day. As of February 27, the World Health Organization reported more than 82,000 confirmed cases worldwide. While nearly 79,000 of those cases were in China, another 3,664 confirmed cases were in 46 other countries, including the U.S. There have been 57 deaths from the virus outside China. The U.S. Centers for Disease Control and Prevention has warned that "It's not so much a question of if this will happen anymore but rather more a question of exactly when this will happen and how many people in this country will have severe illness."
Big I New York members have been contacting us to ask what insurance coverage, if any, their clients might have for losses resulting from an outbreak. There have been several articles in the industry trade press this week on that question, including:
The members who have contacted us have been particularly concerned about whether Business Income Coverage would apply to revenue losses resulting from an outbreak. As one member said in an email on Wednesday, "I’m very worried about my caterers, restaurants, retail stores, and service organizations like the local bank." Unfortunately, it appears that the ISO Business Income and Extra Expense Coverage Form, CP 00 30 10 12, coupled with the Causes of Loss - Special Form, CP 10 30 09 17, will not cover these losses for three reasons:
- Coverage applies only if there is "direct physical loss of or damage to property." The virus is wreaking havoc on people but not property.
- The causes of loss form excludes coverage "for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease." That pretty much describes the coronavirus.
- The form also excludes losses resulting from "delay, loss of use or loss of market." There is no coverage for losses resulting If a caterer's customers start cancelling because the virus has caused people to stop traveling.
On February 7, the Insurance Services Office (ISO) announced that it had published two advisory endorsements to the Business Income and Extra Expense Coverage Form for insurers to adopt and file if they wish. ISO is not filing the endorsements and has not assigned numbers to them. According to a blog post on the website of ISO's parent company Verisk:
The first endorsement provides limited coverage in the event that a business suspends operations due to a closure or quarantine ordered by a civil authority. This endorsement also provides coverage with respect to dependent property that is named in the policy and for vehicles and mobile equipment, where applicable.
The second endorsement also provides coverage when a business is forced to suspend operations due to the closure (or restricted use) of public bus, rail, or ferry lines by civil authorities.
In the three weeks since ISO announced these endorsements, we have not heard of any New York insurers offering them. Members may want to ask the insurers they represent about them.
Other coverages that may be impacted are Workers' Compensation, if a worker who becomes ill can prove that exposure to the virus arose out of his or her employment.
Commercial General Liability coverage may also apply in cases where an employer is alleged to have negligently kept an infected employee on the job, thus facillitating the spread of the virus to third parties. Be aware, however, that ISO offers an endorsement, CG 21 32 05 09, Communicable Disease Exclusion. This endorsement excludes coverager for bodily injury, property damage, and personal and advertising injury arising out of the actual or alleged transmission of a communicable disease. It also applies to alleged negligence in:
- Supervising, hiring, employing, training or monitoring of others that may be infected with and spread a communicable disease;
- Testing for a communicable disease;
- Failure to prevent the spread of the disease; or
- Failure to report the disease to authorities.
The New York State Department of Financial Services has approved this endorsement for use here. It would not be surprising to see insurers begin attaching it to most or all CGL policies.
As we learn more about the coverage impliacations and possible solutions with regard to this fast-changing problem, we will post additional information in this space.