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According to the U.S. Department of Health and Human Services, the typical influenza season in the U.S. “results in approximately 36,000 deaths, 226,000 hospitalizations, and between $1 billion and $3 billion in direct costs for medical care.” Even so, the impact is somewhat limited due to the degree of immunity of the general population as a result of previous infections or from vaccinations. However, both the World Health Organization and the U.S. Department of Health and Human Services suggest that the lack of immunity to an outbreak of a rare strain of the virus could result in a much more severe impact. The threat of the outbreak of one such influenza strain, the Avian Flu, has been a cause of great concern over the past several years.
To date, there have been only limited cases of humans infected with the Avian Flu. It is impossible to predict which disease could cause the next pandemic outbreak, or when it will happen, but it is important to take general precautions and be prepared in the event a pandemic should occur. In addition, business owners could be impacted by severe economic losses depending on the severity of the outbreak. Owners often look to their insurance policies in order to determine what assistance can be offered. Although the outcome of a claim often depends upon the facts and laws in the applicable jurisdiction, there are some generalizations that can be drawn. Understanding some of the underlying issues and potential responses may assist in planning and preparation. Some of the lines of coverage likely to come into play should a pandemic occur are as follows:
Health Insurance - In a worst case scenario, it is estimated 25-30% of the U.S. population could be infected. The health insurance market could see rate increases of 30% or more in place for several years before surplus is replenished and rates stabilize to pre-infection levels.
Commercial General Liability - The standard general liability policy typically responds to bodily injury, sickness, or death allegedly caused by the insured. Insurers are, therefore, likely to closely scrutinize the alleged causal connection between a claimed infection or exposure and the actions of the insured. Because insurers take the position that the policy extends only to actual injuries and illnesses, they are also likely to look closely at the nature of injuries alleged by third parties and may reject claims that are based on exposure without actual symptoms, fear of exposure, or other mental or emotional conditions.
Workers’ Compensation - As a threshold issue, to be covered under a Workers’ Compensation policy, it must be determined that the loss to the employee arose out of the course of employment. However, there is a possibility that the insurance industry will not view any contraction of the flu as a compensable injury, even if work-related. This issue is still being debated and there is no clear indication of how it will be resolved. As with any insurance coverage issue, the facts of individual cases will vary, as will the coverage afforded under various policies depending on state and federal laws and the terms and conditions of policies that provide coverage beyond that which is mandated by law.
Pollution - Insureds may also have separate coverage for damage arising out of pollution, which may provide a basis for a claim in a pandemic situation. However, it is important to be aware of potential issues and possible insurer responses. A typical pollution policy provides coverage for “pollution conditions,” which must result from a “discharge, dispersal, release, seepage, migrations, or escape.” The term “pollution condition” is usually defined broadly and includes both contaminants and irritants. However, insurers have often resisted attempts to recover for non-industrial pollution.
Commercial Property - Real property may potentially be contaminated in a flu outbreak. The government may close or quarantine a building or an entire neighborhood. Such events could give rise to claims under an insured’s first-party property coverage. Insurers begin the analysis of every claim under a property policy, whether for direct damage or time element loss, by asking whether the insured property (or property of the type insured) has sustained physical loss or damage from an insured event or peril. Generally, unless the insured’s policy provides specific time element coverage for “infectious disease outbreaks,” coverage is unlikely to be triggered. With regard to a flu outbreak, the two most likely scenarios resulting in time element loss are:
- Fear that the virus may be present in or near the vicinity where the insured’s property is located, thereby leading to employee absences and/or diminished customer traffic to the site; and
- The actual contamination of the site by the virus,resulting in governmental or voluntary closure.
Although it is unlikely any insurers will immediately acknowledge coverage under a standard property policy for an influenza pandemic scenario, all such potential claims should be considered. Where the insured can demonstrate that a public authority has closed or quarantined its premises as a result of an actual, provable contamination by a pandemic outbreak, the potential claim should be reported to its property insurers for review.
While the risk for an influenza pandemic outbreak is real, precaution on the individual and business levels are the best preventative “medicine.” For more information on pandemic outbreaks, please visit the World Health Organization’s website at www.who.int, the Center for Disease Control and Prevention’s website at www.cdc.gov, and the Department of Health and Human Services website at www.hhs.gov. |
