OVERVIEW OF POTENTIAL COVERAGE ISSUES IN CLAIM RELATED TO THE CORONAVIRUS PANDEMIC
The rapid spread of coronavirus in the United States is causing businesses to shut their doors and people to remain at home as much as possible. In the midst of this truly unprecedented event in recent history, insurers should be prepared for a dramatic increase in claims across virtually every line of coverage. While the specific nature of these claims will take months, if not years, to materialize, Williams Kastner is analyzing the potential breath of claims that will likely arise. Below are some areas that we can expect to see claims in the not-too-distant future related to the coronavirus outbreak.
Commercial General Liability
Liability claims against businesses related to personal exposure to the coronavirus are already beginning to emerge. Princess Cruise Lines Ltd. was sued for gross negligence by passengers claiming it failed to take precautions to prevent a coronavirus outbreak on one of its ships. In claims made by customers, a number of issues could arise under “Coverage A,” such as whether the claim arises from an “accident” or whether the insured deliberately failed to implement safety measures to limit the spread of the virus.
There is a potential for Coverage B claims for alleged false detention and imprisonment if a person alleges they were improperly detained and quarantined. We may also see a rise of slander or libel claims for alleged false publication (oral or written) of information about another person/business regarding exposure or spread of the coronavirus.
There are also a variety of exclusions that could apply, such as those that exclude bodily injury claims from exposure to a “virus,” “contaminants,” “communicable disease,” “hazardous qualities or characteristics of indoor air,” or “other harmful materials.” Like all claims, the applicability of certain exclusions depends on the circumstances of the individual claim. However, the unique nature of this situation could present a variety of scenarios that implicate coverage issues not seen before in CGL litigation.
For claims brought by employees for exposure to coronavirus at their jobsite, coverage may depend on whether the employee would be covered by worker compensation laws, which are in state of uncertainty depending on individual jurisdictions and the ongoing federal response to the pandemic.
Commercial Property Insurance – Business Income (Interruption)
Almost every business will be negatively impacted by the coronavirus outbreak in the short term. While some businesses may eventually recover lost profits, many will not. Many commercial property policies provide coverage for an insured’s losses when it is forced to shut down abruptly either directly or because of supplier interruption. Most policies provide that this coverage applies when there is a “direct physical loss” to a property, either the insured’s or their supplier’s depending on the situation.
If a business is forced to close because of fear of the coronavirus, but there has been no documented cases of an infected employee or customer inside the business, and the business has not been mandated to close by some governmental authority (such as restaurants and bars in some areas), the direct physical loss requirement will likely not be met because the insured’s building remains habitable. Whether a property is impaired if there is a documented cases of an infected employee or customer, or the business is forced to close by the government, it is more likely that a direct physical loss can be shown.
Many of the same exclusions mentioned above, such as property damage from viruses and other diseases, may apply as well. Again, the applicability of such policy language depends heavily on the individual circumstances of the claim.
One overlying issue for many of the claims related to the coronavirus will be whether a person was actually infected or not, and even if so, how that person became infected. If a claim arises from a fear of coronavirus, but it cannot be confirmed if the person actually had the coronavirus, it is possible that other policy language may apply, such as “bodily injury.” What if a person contracted the coronavirus, yet never developed any symptoms? These are issues that will need to be addressed on a claim-by-claim basis.
Another factor that will arise in many coronavirus-related claims will be causation. For example, even if it can be shown that a person was infected at some point in time, how can we establish when and how the infection occurred? Given the causation issues that arise in mass tort litigation, we may see courts apply novel theories of causation to such claims, which could trigger both coverage and exclusionary language.