In the current climate, businesses need to ensure they have adequate cover for the legal and financial risks arising out of COVID-19. Many business interruption policies require direct physical loss of or damage to property before business interruption cover is triggered. Others also go so far as to exclude certain disease types, which ordinarily include pandemics such as COVID-19. Some specialised ISR policies offered to certain industry groups such as Health and Aged Care may contain extensions of cover for losses caused by 'communicable or infectious diseases' without requiring physical damage to insured property.
Some areas to check in regards to your organisation's liability and policy are outlined as follows:
General Liability to Third Parties / Commercial General Liability Policy
Organisations such as hospitals, hotels, entertainment providers and universities experience a significant amount of close interaction among the public. Such organisations that do not develop pandemic plans (or have clearly deficient plans relative to their peers) put others at risk and may face personal injury claims by affected persons in the event their lack of precaution results in infection.
Commercial General Liability Policies protect organisations against third party bodily injury claims resulting from exposure to harmful conditions. We expect that general liability policies will provide protection for bodily injury claims brought by third parties who have been infected by COVID-19 in circumstances where the Organisation has failed to exercise reasonable care in guarding against or warning of the risk of exposure to COVID-19. Cover under general liability policies is typically limited to where such a 'claim' relating to compensation for personal injury (often defined to include disease) has been made against the organisation, rather than simply where the disease has been contracted by a third party.
While commercial liability policies do not generally include an exclusion for pandemic or infectious disease, we recommend reviewing policy wordings for any such exclusions.
Professional Negligence / Professional Liability Policy
Organisations such as health care providers, Aged Care providers and hospitals are faced with the risk of exposure to claims brought by patients, customers for compensation in respect of bodily injury arising out of the provision of or failure to provide medical, health care related and aged care related services.
Professional Liability Policies generally provide cover for claims brought by third parties who have been injured arising out of the provision of or failure to provide professional services to a third party. Accordingly, the Professional Liability Policy is likely to respond to any claim by a third party arising from exposure to COVID-19 as a result of negligence or failure on the part of the Organisation to put in appropriate measures or plans.
Managerial Liability / Directors' & Officers' Liability Policy
Directors may be at risk for legal action from shareholders where they fail to develop adequate contingency plans, fail to observe recommended or required protocols, or fail to properly disclose the risks of COVID-19 posed to the company's business and financial performance.
Directors may be subject to shareholder class actions alleging that their failure to observe protocols or unreasonable actions in response to COVID-19 may cause the company economic loss
In circumstances where employees are infected by COVID-19 at work Directors may also have exposure in circumstances where the Company fails to meet its primary duty under Work Health & Safety Legislation to provide that the workplace is without risk to health and safety to workers.
A Directors' & Officers' liability policy (D & O Policy) will generally provide cover for claims brought against Directors in respect of wrongful acts committed in their capacity as a Director of a Company. Some D & O Policies may contain a broad form 'Bodily injury' exclusion which could potentially exclude cover for claims arising from COVID19.
Employers Liability / Workers Compensation
Employers have obligations to ensure safe work environments. They may be open to risks where they do not have appropriate plans in place, fail to communicate public health advice to their employees, or fail to adhere to any government mandated restrictions.
Companies employing health care workers may be at higher risk. For example, during the SARS outbreak (a very similar outbreak to COVID-19), many people who became ill were medical workers. For private medical facilities in particular, employers with inadequate plans may be targets for legal actions.
Workers Compensation policies generally provide cover to an employer in the event that one of its workers suffered an injury or dies in the course of their employment. 'Injury' is generally defined under Workers Compensation legislation to include a 'disease' and there exists the requirement for employers to take reasonable precautions to prevent injury to their workers. Employers may fall foul of this requirement if they fail to effectively manage the risks of their workers contracting COVID-19 in the workplace.
Travel Liability / Corporate Travel Insurance
Travel insurance policies generally provide cover for cancellation, medical or other travel expenses relating to unforeseen circumstances or personal injury during all types of travel. However, insurers are each responding in different ways to COVID-19, and have accepted different dates for COVID-19 as a known and foreseen event both in relation to mainland China and worldwide.
We recommend reviewing your insurer's response to COVID-19, in particular, the date from which it may cut off cover for claims for losses occasioned by or happening through COVID-19 as a known and foreseen event. Corporate travel policies taken out or renewed prior to COVID-19 becoming a listed disease are more likely to provide coverage for cancellation of trips to countries subject to Level 4 government travel advice.
We also recommend reviewing the policy wordings, which may contain exclusions for medical expenses or personal injury relating to disease or contagion, or for cancellation or other travel expenses relating to known or foreseen events.
Next steps for managing your insurance risk
- Review your insurance programme/insurance policies to ensure that you have adequate cover for the legal and financial risks arising out of COVID-19.
- Assess whether you should be notifying your Insurer of any fact or circumstances which could give rise to a claim under your 'claims made' policies.
If you are looking for advice or support with insurance issues arising from COVID-19 or public health emergencies, MinterEllison can assist you with understanding and responding to these risks. We provide solutions to Corporates, Insurers, Intermediaries, Underwriters, Brokers and Agents, across the full risk spectrum within the insurance sector.