Ebola is now viewed as one of the most serious risks on the globe and insurers are rethinking how future insurance policies should treat it. Ebola and similar diseases/viruses are not restricted to healthcare facilities or operations; it is a potential pandemic that could affect people wherever they live, work or play.
The CDC indicates that Ebola can only be transferred by direct contact with the virus. According to the CDC website on October 27, 2014:
"When an infection does occur in humans, the virus can be spread in several ways to others. Ebola is spread through direct contact (through broken skin or mucous membranes in, for example, the eyes, nose, or mouth) with:
- blood or body fluids (including but not limited to urine, saliva, sweat, feces, vomit, breast milk, and semen) of a person who is sick with Ebola
- objects (like needles and syringes) that have been contaminated with the virus
- infected fruit bats or primates (apes and monkeys)
Ebola is not spread through the air or by water, or in general, by food. However, in Africa, Ebola may be spread as a result of handling bush meat (wild animals hunted for food) and contact with infected bats. There is no evidence that mosquitos or other insects can transmit Ebola virus. Only a few species of mammals (for example, humans, bats, monkeys, and apes) have shown the ability to become infected with and spread Ebola virus. (CDC web site 10/27/2014)"
Individuals recently suspected of contact with an infected Ebola person have been quarantined for 21 days and those individuals that have manifested symptoms have been moved to special facilities equipped to deal with infectious diseases. This raises of a number of concerns for insureds with regard to what coverage is in place to help their employees and protect their businesses in the event of an Ebola scare or contamination. Below is a short review, looking inside the box at what already exists with traditional risk coverages.
Workers' Compensation
The first coverage already impacted due to the Ebola virus is for the medical workers who have been in contact with the disease. Workers' compensation coverage is mandatory in every state for most employers. There are also various similar laws for railroad workers, dock workers, and maritime employees.
Essentially, workers' compensation covers illness or disease if it is arises out of the employee's occupation. The basic two prong test is whether the illness or disease arises out of employment ("AOE") and occurring in the course of employment ("COE"). In short, the employee must show that the injury did occur at work while employed and it was caused by an employment condition. This means the cause must have arisen out of the particular work or condition specific to the work. Although there may be slightly different criteria to be met under each individual state workers' compensation act, workers' compensation coverage may be available to employees with the Ebola virus.
Of course, these employees must meet the AOE, COE, or similar test depending on the state and act. Most employees will not meet this test because they are not engaged in work that has a connection to Ebola. However, healthcare workers, police, EMT or other services who assist the public and are involved in situations where there is an increased risk may be able to meet this test and the coverage should respond.
Commercial General Liability Coverage
The most widely-held policy by most businesses is the Commercial General Liability ("CGL") policy, under which a broad range of coverage is available. The policy also provides a defense for the insured against claims actually or potentially falling within the coverage. As such, this policy will be the go-to policy in the event claims are made against businesses as a result of Ebola-related events.
Additionally, the policy covers property damage, which results in physical injury to property as well as loss of use of tangible property that has not been physically injured. There may be claims for property damage or loss of use of property as a result of events related to Ebola. Insurers may take the position that, without physical injury or destruction of tangible property, certain types of claimed damage are not covered and that the mere presence, or perceived presence, of the virus in or on property does not constitute physical injury.
The policy also contains specified wrongs under the Personal Injury Coverage section of the policy, including wrongful eviction. Over the years, the enumerated wrongs have been narrowed, but this section should still be reviewed for potential applicability. Although policy language varies, as does the applicable law in the jurisdiction, in some situations it may be possible to argue that the actions of the landlord may fall within reach of this section.
Today, the CGL most often contains some form of pollution exclusion, from sudden and accidental to an absolute pollution exclusion. The definition of what constitutes pollution varies by policy and jurisdiction. Generally, pollution includes all solid, liquid or gaseous contaminants or irritants. Despite insurers trying to include all matters of pollution, there can be exceptions made in the policy; in addition, the laws of different jurisdictions vary on the interpretation of the same definitions. Some jurisdictions argue that the definition is only meant to exclude coverage for industrial chemicals, while others state it must be broadly interpreted to apply to anything that is potentially an irritant or contaminant. As such, it is possible that insurers will argue that Ebola is an irritant or contaminant.
There are also owned property exclusions that can be found in many GL policies that insurers may raise as a coverage issue. Additionally, there are a variety of court interpretations under both GL and pollution policies concerning whether certain investigative costs will be covered and, if covered, are considered part of the loss or an expense.
The interpretation of coverage wording varies by jurisdiction and can be interpreted positively or negatively. Because of this, it is important that any claim or potential claim related to Ebola, or similar situations, be reported to primary and excess underwriters as soon as there is knowledge of a claim.
Pollution Coverage
Ever since "Legionella Bacteria" came onto the scene, environmental carriers have attempted to broaden their policy forms to encompass "Bacteria". Basically, they expanded on the definition of "Pollutant" to now include terms associated with the medical industry such as bacteria, medical waste and the generic term of "contaminants." Several of these carriers have come out with industry-specific forms to address the unique exposures associated with real estate, public entities and the now-popular "healthcare environmental."
So is there any coverage under an environmental policy for Ebola? It depends on the interpretation, situation, policy wording, and prior interpretations. There are a number of variants to these coverages and a number of provisions that insurers may use in response to the Ebola virus.
Environmental policies may provide some coverage. Environmental Impairment Liability (EIL) or Site Pollution Liability (SPL) policies respond to pollution incidents or events and provide coverage for bodily injury and property damage as well as clean-up cost. Each and every policy is unique in its definition of pollutant, insuring agreement, restrictions of application of the insuring agreement and exclusions.
Some policies outright include disease and virus but then have "potential pandemic" and "pandemic" exclusions. There are also policies that have been sold by carriers as "Bacteria and Disease" insurance. Is Ebola a pandemic disease? The definition of disease will need to be reviewed before that question can truly be answered.
Some EIL policies state that the "virus or bacteria" must originate from or at the insured location but does not specify or define "originate". Varying policies have discovery and reporting wording and limitations that need to be scrutinized to verify if any coverage exists.
The definition of pollutant or pollutant condition contains terms like solid, liquid, gaseous, irritant, contaminant, etc. Previously, this wording was never used to include anything related to medical events. Now, many carriers include "legionella bacteria" or "bacteria" within this definition. The policies will respond to certain situations that arise as a result of bacteria since bacteria is now a defined pollutant. However, bacteria are not viruses or diseases.
Although the term "pollution conditions" may be interpreted broadly, it also may not extend to naturally occurring substances, which creates a debate as to what is naturally occurring. As such, insurers may argue that the Ebola virus is a naturally occurring substance and falls outside the coverage grant.
There are some policies that will freely provide "clean-up" and disinfection coverage but exclude any and all bodily injury. If the definition of property damage includes clean-up costs of a pollution condition, there may be coverage for the Ebola virus as it relates to property damage. Bodily injury may also be defined to include physical injury, illness or disease, including any associated medical monitoring and emotional distress or shock.
There are also endorsements that have been placed on policies over time, often on hospitality type accounts, such as: "Exclusion – Communicable Disease: This policy does not apply to bodily injury, property damage or personal and advertising injury arising out of the transmission or any communicable disease." As such, policies need to be checked closely.
Traditionally, many pollution policies contain wording in the definition of pollution, or elsewhere in the policy, that expenses should only be incurred in response to a government order or environmental law. This would include state, municipal, provincial, or other laws, statutes, ordinances and regulations.
An insurer may take the position that any closure or decontamination is voluntary and not supported by governmental orders, and that directives may not be orders issued by the appropriate governmental entity. It is therefore important to understand where the orders or directives have their origin when working with local health authorities, and to review policy wording carefully.
Physical Damage
Most commercial property policies cover physical damage to property and business interruption, as a result of a property damage claim. The first question will be whether there is any direct physical damage to covered property as a result of the Ebola virus. That question has yet to be answered, but so far each location where a confirmed Ebola victim has been present has required an extensive clean-up. The property policies often contain exclusions for losses caused directly or indirectly by fungus and/or bacteria or contamination. There are also limitations on pollutant clean-up and removal coverage in that it would only respond to expenses directly related to extracting pollutants caused by a covered loss.
There are additional limitations on whether there would be coverage for testing or monitoring, or assessing the existence, concentration, or effects of "pollutants." Pollutants are often defined as any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemical and waste. Waste includes materials to be recycled, reconditioned or reclaimed. Insurers may claim that any clean-up is not caused by a covered loss and that a virus is not a pollutant.
Business Interruption
Business interruption coverage covers the actual loss sustained by the interruption of business resulting from a direct physical loss or damage to covered property. Recovery under this section will be governed by the specific terms and conditions of the individual policy.
- Direct physical loss to covered property as a result of a covered cause of loss.
- Exception to damage to the insured's covered property is when the insured has an extension of coverage, such as civil authority where the physical damage involves other property.
For Ebola, there are two likely scenarios that may trigger the business interruption coverage:
- There is widespread fear that the virus may be present at the insured's location or in the vicinity which could lead to employee absences or diminished customers to the insured's site.
- There is actual contamination of the insured's property by the Ebola virus.
In the first scenario, under standard property policies, the insurers may argue that there is no coverage for losses arising out of the public's fear of entering the premises, as there is no direct physical damage to covered property by a covered cause.
In the second scenario, depending on the type of policy, an insurer may have less ground to argue that there is no direct physical damage. While a specified perils policy will likely not provide coverage, an all risk/special form policy may provide coverage if not excluded. At the same time, insurers may argue that the mere presence of the virus does not constitute direct physical damage to covered property and may additionally point to the contamination exclusion or other similar exclusions in the policy.