13 Oct COVID-19 – How is the Market Reacting?
A recent news story spoke to U.S. businesses facing a potentially emerging legal threat (relating to COVID-19) from claims that workers brought coronavirus home and infected relatives. The financial impact has the potential to be significant. This “take home” article noted that between 7 and 9 percent of the U.S. COVID-19 deaths so far are believed to stem from take-home infections. The allegations may center on that businesses failed to adopt proper safety measures.
So, aside from the major issue of the lack of business interruption coverage for businesses affected by the COVID pandemic, where is the industry headed on the COVID exposure?
Recently ISO developed their Communicable Disease Exclusion. This exclusion applies to both Coverage A (Bodily Injury and Property Damage Liability) and Coverage B (Personal and Advertising Injury) and similarly states for both that:
“This insurance does not apply to: Communicable Disease (BI / PD / Personal Advertising Liability) arising out of the actual or alleged transmission of a communicable disease. This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the: a. Supervising, hiring, employing, training or monitoring of others that may be infected with and spread a communicable disease; b. Testing for a communicable disease; c. Failure to prevent the spread of the disease; or d. Failure to report the disease to authorities.”
It certainly appears the intent is to be broad. The time is now for agents to raise their level of alertness.
Some issues to focus on:
- Are carriers going to include this endorsement (or one of their own) on upcoming renewals? I would think that since this is a “new exclusion,” admitted carriers will need to issue a conditional renewal notice advising the insured (and you as the agent) that the upcoming renewal will include some type of a COVID exclusion. Since the conditional notice requirement does not apply to the E&S market, they should include some form of COVID exclusionary language on their renewal proposals. Proposals from the E&S market should be heavily scrutinized for any COVID language. It is suggested to secure a specimen form of the exclusion to fully review the language.
- Communication to your clients. It is suggested to not rely on just one approach to accomplish this. Providing some type of advance notice is something to be considered. Then, when you are made aware of the carrier’s plans to include some exclusionary language, notify your client. You want to have good documentation of these discussions especially if the conversation is verbal.
- Include a reference to the exclusion on your agency proposal and bring attention to this issue in the discussion. When listing exclusions, it is best to state, “Exclusions include but are not limited to the following.”
- Policy checking. As has been stated many times, policy checking is a very under-appreciated E&O risk prevention technique. Without a doubt, many E&O claims could have been avoided by thorough job of policy checking. On this COVID issue, agents should be looking for the inclusion of any specific exclusionary language. It may be a specific endorsement number / name or it may involve the carrier refiling their liability coverage form to include this language. The change of edition dates should be a red flag that a substantive change was made. It is important to also note any exclusionary language on any umbrella / excess liability coverage forms. Other coverages many be affected as well.
There is a chance that states will pass legislation (a few already have) providing various entities (businesses, health care workers, schools, etc.) some form of immunity. This would prevent lawsuits arising from exposure, transmission, or contraction of COVID (or any other virus mutation) from essentially happening unless there is demonstrated reckless, intentional, or willful misconduct on the part of the businesses, etc.