COVID-19: Insurance Coverages and Limitations

The situation surrounding the coronavirus, or COVID-19 continues to develop. As this illness unfolds, always check the Centers for Disease Control and Prevention (CDC) or the World Health Organization (WHO) for the most up-to-date information. This is an informational resource for RCM&D clients and business partners. It is intended to provide general guidance and is not intended to address specific scenarios. Regarding insurance coverage questions, each specific policy must be reviewed in its entirety to determine the extent, if any, of coverage available for the impact of the Coronavirus or COVID-19. If you have questions, please reach out to your RCM&D contact

There are widespread expectations that many property & casualty carriers may contest many claims as a result of COVID-19, or the coronavirus, as pandemics and epidemics are often deliberately excluded from coverage.  While some policies may cover these claims in certain circumstances, there are a number of limitations and exclusions to be aware of. As in most situations, policy language is critical to understanding the level of coverage, if any, that may be triggered.

Business Interruption & Contingent Business Interruption

Business Interruption coverage provides coverage for losses as a direct result of a halt in operations (Business Interruption) or from an indirect impact from affected clients, vendors or suppliers (Contingent Business Interruption). Many times, it requires physical property damage to be present. Environmental conditions such as the presence of toxic gases or other pollutants that may render property unusable could potentially trigger coverage, but most policies specifically limit coverage for the presence of bacteria and viruses.

This may be one of the biggest contested areas for claim coverage as a result of COVID-19 due to the ambiguity over what constitutes a loss under these policies. The greatest argument for Business Interruption coverage will come from instances where there is a physical component to the halt in operations.

Travel Insurance & Medical Evacuations

Forgoing travel plans due to fear of traveling for any reason is rarely covered by a travel insurance policy. Many policies also include limitations and exclusions for outbreaks, epidemics and pandemics such as COVID-19.  The exception would be if the traveler purchased the ‘Cancel for Any Reason’ upgrade on the policy. This optional coverage may cover up to 50 -75 percent of the cost of the trip at a significantly higher premium than a standard travel policy.

Medical evacuation plans will not provide coverage for any individuals who would like to leave an affected region due to fear or due to being quarantined while abroad. These plans will only be triggered once an individual has contracted the COVID-19 or other illness and need to be medically evacuated.

Event Cancellation

While businesses and organizations around the world are grappling with how to handle the potential continued spread of the COVID-19 virus, one major concern is whether or not to cancel an upcoming event. While most event cancellation policies do not include coverage for communicable diseases, those that purchased this coverage at an additional premium will still find limitations. Given COVID-19’s current status as a global health crisis, it is likely that it will become a specific exclusion in all future event cancellation policies purchased.

Workers’ Compensation

Contraction of COVID-19 at work is not enough to trigger a workers’ compensation policy. Generally speaking, COVID-19 is seen as human-based risk exposure and is not particular to any specific type of occupation.  In order for an illness to be compensable under workers’ compensation, it must meet two criteria. The contraction of the illness must be tied directly back to the scope of employment and the exposure to that illness must be directly linked to the specific and peculiar conditions of that employment. As a result, workers’ compensation claims are unlikely to provide for losses as a result of the COVID-19 pandemic for most employees.

The largest potential exception to this understanding may come from claims from healthcare workers who are exposed to those with COVID-19 as a result of their employment. It is important to note that each workers’ compensation claim is judged singularly and there are no blanket rulings as a result of global pandemics like COVID-19. Additionally, individual state and federal laws will be a factor in these determinations.

General Liability, D&O and E&O

Commercial General Liability (CGL) may be the first line of defense as a result of allegations from third-party claims as a result of COVID-19. According to a recent article from the Council for Insurance Agents and Brokers (CIAB), “While general liability policies generally cover liability for bodily injury and property damage, as well as typically a legal defense against those claims, it is an open question whether environmental exclusions often included in those policies will allow an insurer to deny coverage.” Additionally, many CGL policies may have exclusions in place for claims resulting from infectious disease incidents.

Additional policies that may be triggered include Directors & Officers (D&O) or Errors & Omissions (E&O) policies. If shareholders believe the business was negligent in taking appropriate actions, such as disclosing financial risk or securing supply-chain alternatives, to protect the business during the pandemic, a lawsuit may be levied. A D&O or E&O policy may be triggered to provide for the defense against the third-party suit. Some exclusions to look out for in these policies include those that relate to bodily injury, fraud, dishonesty and willful violations of the law.

Pollution Legal Liability

According to recent communication from RT Specialty, coverage may be available to certain businesses through existing Pollution Legal Liability (PLL) policies via Disinfection Expenses. While these policies often provide coverage for viruses and bacteria, there are numerous restrictions that may be written into the policy language. Coverage restrictions may include “Communicable Disease Exclusions, Coverage Sublimits, and/or a requirement that the virus/bacteria be facility-borne.”