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October 16, 2014
By: Ed Rhone, Principal, Claims Manager
The headlines are full of the latest developments on the spread of the Ebola virus. As of the date of this article, two healthcare workers have been infected at a Dallas hospital. Our clients have inquired as to the potential insurance impact and risk control measures they should take in light of this emergent threat.
Risk Management Implications
Most firms in the U.S. have established business continuity plans which address many possible business disruptions. Fortunately, U.S. businesses have not had to face pandemic disruptions that are on the scale possible by the Ebola virus. The World Health Organization estimates the number of cases could soar to 10,000 a week in Guinea, Liberia and Sierra Leone by the end of the year. The high number of cases in Western Africa could increase the number of cases coming into the U.S. All industry sectors need to monitor the infection spread rate very closely, as well as, advice coming from the government, and modify and amend their business continuity plans accordingly.
Some of the main points for businesses to consider include:
Each state has unique statutes associated with occupational disease. The issue for Workers’ Compensation to apply to a worker infected with the virus is–was the infection related to the work environment? An obvious case in which workers’ compensation would likely apply is the two nurses who contacted the virus while caring for an infected patient at the hospital where they worked. In the nurses’ situation, workers’ compensation could cover medical bills and reimbursement of lost wages for Ebola virus disability.
The difficulty of this coverage is the determination of where the employee was infected and was that related to their job or employment. If the number of Ebola cases rises in the U.S., then it is less likely Ebola cases will become a workers’ compensation exposure, as it will be more of a general population exposure versus industrial.
However, employees that are required to travel overseas for their employers may have a higher exposure for workers’ compensation coverage. Travel by employees abroad may also involve travel accident insurance policies in addition to workers’ compensation coverage. Should a claim be presented by an employee, it would be recommended the matter be reported to their workers’ compensation carrier or claims administrator for coverage evaluation.
Most General Liability insurance policies insure against claims an insured becomes legally obligated to pay associated with an occurrence that results in bodily injury or property damage. “Bodily Injury” is usually defined as injury, sickness or disease sustained by a person, including death. “Property Damage” usually requires physical injury to tangible property.
Most general liability insurers will evaluate each claim based upon its merits, but they may likely reject claims for anxious customers or allegations of fear or disturbances to mental wellbeing. There could be allegations of “personal injury”, specifically defined in the policy, which could trigger defense coverage for an insured.
However, most GL policies have exclusions for pollution, which can be broadly defined to include “contaminates or irritants”. Insurers’ coverage evaluation may point to the pollution exclusion to remove coverage for an insured, claiming the virus is a “contaminate”. Again, each claim would need to be evaluated based upon the allegations presented against the insured. We would recommend a policyholder discuss any possible claim involving a third party claimant with their insurance broker.
Publicly traded companies whose stock price drops significantly as a result of Ebola fees could see lawsuits being filed against their directors and officers. Directors’ & Officers’ Liability (D&O) policies would likely provide defense for shareholders suits, again, dependent on the allegations. D&O policies are designed to provide defense and indemnity for actions taken or inaction by directors or officers that negatively impact the operations of the firm. While D&O policies also carry pollution exclusions, most policies will provide an “exception to the exclusion” for alleged wrongful acts taken by the entity or directors that affect the organization. In other words, claims for financial damage to the organization and shareholders may be covered, but bodily injury or property damage to third parties arising out of the pollution exposure may not.
Property insurers intend for their policies to cover direct, physical damage to property. The property policy is often extended to cover time element or business income and extra expense exposures from a covered loss to property. As a pandemic is usually human injury, and doesn’t involve property damage, it is likely the property coverage will not respond to Ebola virus shut down to businesses, unless there is a specific endorsement to cover a pandemic event. Similarly to the general liability policy, insurers may also point to the pollution exclusion usually contained in property policies as reason to decline coverage.
There are endorsements being offered by insurers for coverage against business losses suffered because of government-ordered closure stemming from the Ebola virus. Again, this endorsement must be added to most property policies, and it will not provide coverage for businesses that voluntarily close or cease operations due to the virus. Only government orders for closure would trigger this coverage extension.The specific endorsement for Ebola virus coverage is relatively new and should be discussed with your insurance professional.
For More Information
This article is not intended to be exhaustive, but simply advise clients of the risk management and insurance implication of the Ebola virus. Please consult with your insurance professional for more specifics regarding other coverage that might be available or impact your firm’s specific industry.
Sources to consider for more information are:
Centers for Disease Control and Prevention
World Health Organization
European Centre for Disease Prevention and Control
Parker, Smith & Feek – Flu Pandemic Preparedness
About the author: Ed Rhone is a Principal of Parker, Smith & Feek and Manager of our Claims Department.
This article is provided for informational purposes only and is not intended to provide legal or actuarial advice. The issues and analyses presented in this article should be reviewed with outside counsel before serving as the basis of any legal or other decision.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.