As the U.S. and the rest of the world grapple with the appropriate means and steps to mitigate the spread of the COVID-19 version of Coronavirus, insurers and reinsurers can expect their insureds to submit all manner of claims if they are not already inundated with them. Third-party claims against insureds are also likely, with requests for defense and indemnity soon to follow. As this virus spreads and ramifications continue to develop, keep an eye on this page for updates and in-depth discussions on topics of interest to insurers and reinsurers, some of which are highlighted below. If you would like to discuss any of these topics or have a particular issue you would like to discuss further, please visit our COVID-19 Resource Center for access to key contacts at Locke Lord who can put you in touch with appropriate team members.
- Communicable disease exclusions appear at the forefront of considerations for these insurers.
- But, numerous jurisdictions in the U.S., and abroad, are issuing or contemplating the issuance of executive orders limiting public gatherings based on number of attendees. Whether such orders trigger coverage extensions found in some event cancellation policies and whether communicable disease exclusions would still apply, will no doubt be of interest to those insurers (and their insureds) as the coronavirus rapidly spreads.
General Liability Insurers
- Other considerations aside, the standard insuring agreements still require a “bodily injury” caused by an “occurrence,” which is generally “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Is, for example, contracting, spreading, or failing to adequately sanitize property enough to qualify as an occurrence?
- As to business interruption, some insureds are likely to see financial losses and presumably want to find a way to consider these the result of a covered loss. But, a claim of that sort is not likely to qualify as direct physical loss of or damage to property as opposed to simply economic loss from market conditions.
- As to market conditions though, insurers should be on the lookout for claims related to disruptions in supply chains that make it impossible for an insured to operate or deliver goods of their own.
- (Third-Party Claims) Notwithstanding significant first-party claims, it should be anticipated (as some cruise ship occupants have already alleged) that there will be allegations that insureds failed to take adequate steps (including screenings and potential quarantines) to prevent the virus, breaching alleged duties owed to passengers. While proving proximate cause in such circumstances may be difficult, it is unlikely to stop the filing of claims. Would a negligently or wrongfully performed quarantine constitute a false imprisonment or a personal injury?
- While event insurers may have the communicable disease exclusions on which to rely, these may not be present in certain CGL policies.
- And, on Monday, March 16, 2020, the New Jersey legislature’s Homeland Security and State Preparedness Committee discussed draft New Jersey Bill A-3844, which concerns business interruption insurance during the current COVID-19 state of emergency. If enacted in its current form, the bill would require insurers that issued business interruption insurance in New Jersey to cover claims arising out of the “coronavirus disease 2019 pandemic,” even if the business interruption policy contained a “virus” exclusion. We anticipate that other jurisdictions will enact similar legislation and that insurers will challenge such legislation under the U.S. and other State Constitutions.
- The skyrocketing amount of employers requiring temporary work-from-home with employees that may not all be familiar with such arrangements or the technology is sure to spike the number of unintended clicks and miscommunications that lead to malware and ransomware attacks.
Placement and Renewal / Gaps in Coverage
- Underwriters and brokers themselves are just as susceptible to the office closures. Is there a risk delayed claims reviews and renewals will create gaps in coverage?
- The Lloyd’s Market Association (LMA) has prepared language designed to provide that (re)insureds will not be left without cover if normal renewal discussions at Lloyd’s are not able to proceed.
Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.