Is There Property Insurance Coverage for Damaged COVID Vaccine?

Is There Property Insurance Coverage for Damaged COVID Vaccine?

Many of our healthcare clients are preparing to receive and distribute the COVID-19 vaccine.  It is necessary to keep the Pfizer vaccine at -94 degrees Fahrenheit.  So what happens if the vaccine is damaged and becomes unusable?  Is there insurance coverage for that under the property policy?  The answer is probably yes, as long as the deductible is low enough and the limit is high enough.  

The first thing that needs to be established is the hospital’s insurable interest.  Does the hospital suffer a loss if the vaccine becomes unusable, or would they get another shipment for no additional cost?  If there was a financial loss, does it exceed the property insurance deductible?   

Second, how did the loss occur?  Almost all property policies are issued on an “all-risk” basis.   In other words, all direct physical damage is covered unless there is a specific exclusion for it.  Therefore, the most common causes of property loss, such as fire or water damage, would be covered.  

However, suppose there is a problem with the refrigeration. In that case, we have to look to the equipment breakdown portion of the policy, which is usually a separate part of most property policies.  Sometimes the equipment breakdown policy is issued separately.  

There is usually coverage for perishable stock or goods under the equipment breakdown insuring agreement.  The policy would cover direct physical loss or damage to perishable stock, generally defined as personal property maintained under controlled conditions for its preservation and susceptible to loss or damage if the controlled conditions change.  This is covered if there is an accident arising out of a mechanical breakdown. Coverage for perishable stock is usually provided at a sublimit or at a limit less than the overall policy limit.  

There also could be coverage in the event of a power outage, usually described as utility interruption.  This coverage has a waiting period. If the vaccine becomes unusable quickly (we don’t believe that is the case), then there may be no coverage unless the power was out for longer than the waiting period.  It’s best to avoid losses altogether, so freezers should be hooked up to emergency generators.

To summarize, there would be coverage if:

  • A hospital or other healthcare facility would be responsible for a financial loss related to the vaccine and the cost of that loss exceeded the deductible and
  • The loss occurred from a typical property loss reason such as fire or water damage or
  • The loss was related to the mechanical breakdown in refrigeration.