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The possible spread of the Ebola virus in the United States is raising coverage concerns under commercial insurance ranging from general liability to the business interruption protection of property policies.
Potential problems — such as whether an Ebola case triggers coverage, or the applicability of pollution and other exclusions — vary among policies. The extent of a company's coverage will depend on the circumstances of a claim and a given policy's wording, legal and insurance experts say.
At least one property/casualty insurer moved last week to limit its Ebola exposure. Ace Ltd. said it will exclude Ebola claims for any “injury, damage, expense, cost, loss” or liability related to the Ebola virus via an endorsement for new and renewing general liability insurance for companies exposed to certain African countries, where the pandemic began and the death toll neared 5,000 as of Friday.
Companies need to understand where they have coverage and where they might not, and make decisions based on that understanding, said Logan Payne, senior account manager of global client services with Lockton Cos. L.L.C. in Kansas City, Missouri.
“Most clients at this point are asking questions to try to assess steps to minimize” risk and judge how liability policies might respond, said John Denton, senior vice president of the national casualty practice of Marsh USA Inc. in New York.
In the U.S., the first person diagnosed with the deadly virus, a Liberian, died on Oct. 8 at a Dallas hospital. Two nurses who treated him subsequently contracted the disease, stoking national fear. On Thursday, the disease reached New York City, where a doctor who recently returned from treating Ebola patients in West Africa tested positive for the virus.
While hospitals and other health care facilities are on the front lines of Ebola risk, agriculture, mining and energy companies actually operating in West Africa and travel, hospitality, entertainment and sports event companies that move or host large numbers of people also have significant exposures.
“You can imagine that if this becomes a pandemic, all these industries could face huge liabilities,” said Joseph F. Bermudez, a partner at Wilson Elser Moskowitz Edelman & Dicker L.L.P. in Denver.
People contracting Ebola on an airliner or at a hotel or sports venue might sue companies involved, alleging negligence for failing to prevent their exposure. A company would expect its general liability insurers to respond, but there could be coverage disputes, experts say.
One could involve general liability policies' pollution exclusion, which typically bars claims arising from any “solid, liquid, gaseous or thermal irritant or contaminant,'' including waste.
Courts have been divided on the pollution exclusion in previous cases of viral and bacterial contamination, said Michael H. Sampson, a partner at Reed Smith L.L.P. in Pittsburgh. In one case, a Florida federal judge ruled in 2009 that the exclusion barred coverage of claims arising from a swimming pool contaminated with coxsackievirus. In a separate 2011 case, another Florida federal judge ruled the exclusion does not apply in a case of contamination by the bacteria that causes Legionnaire's disease, he said.
“It depends on the case law, and can cut both ways,” Mr. Payne said.
Some experts give policyholders good odds of overcoming pollution exclusions that don't specifically deal with viruses. While court interpretations of the pollution exclusion have differed, “insurers, I think, would have a hard time arguing that it applies,” said Katie Pfeifer, partner at Dorsey & Whitney L.L.P. in Minneapolis. “Which doesn't mean they won't try.”
Liability policies also may have mold and bacteria exclusions, though experts question whether they would affect Ebola claims. Viruses, Mr. Payne said, are very different types of organisms.
“I don't see that as much of an exclusion, either,” Ms. Pfeifer said.
Some companies, particularly in the health care and food industries, have policy endorsements specifically barring claims related to biological agents such as viruses, Mr. Bermudez said.
Businesses failing to take steps to protect clients and customers from Ebola also could find insurers citing the “expected or intended” language of general liability policies to deny claims, experts say.
Insurers may argue that if a policyholder is aware of the risk and exposes third parties despite it, they could have “expected” the resulting losses, Lockton's Mr. Payne said in an August white paper on the subject.
Some, though, see this as another tough argument for insurers to win. The “expected or intended” defense “is usually a very high threshold for carriers to get over to avoid coverage,” Marsh's Mr. Denton said. “I don't think it's a particularly strong defense in cases where employers are trying to limit the spread of the disease.”
Ebola contamination of a company's facilities or those of its suppliers could result in business interruption losses, which experts say opens another set of coverage questions.
Traditional business interruption coverage is triggered by direct physical loss or damage to insured property, and contamination likely doesn't qualify despite its resulting losses, experts say. Coverage for closures ordered by a civil authority or for lack of ingress/ egress similarly requires physical damage to surrounding property.
“Physical damage and contamination may be the same thing (from a policyholder's perspective), but I can tell you that insurers will not see it that way,” said Duncan Ellis, U.S. property practice leader at Marsh USA Inc. in New York.
Many health care companies have bought extensions to traditional business interruption policies that cover lost income caused by spread of communicable diseases, Mr. Ellis said.
A hospital, for example, would be insured for lost income and “reasonable” cleanup costs if government authorities ordered it to shut down to decontaminate its emergency room, he said.
Before the latest Ebola outbreak, the coverage extension received relatively little thought, much as contingent business interruption coverage before the 2011 Thai floods, Mr. Ellis said.
“This has now become an 'aha' moment for a lot of people,” he said.
Similar types of nondamage business interruption coverage may become a solution for some companies. Lockton recently introduced a program for gaming, entertainment and sports clients that covers income lost for reasons that include voluntary closure of a facility due to circumstances beyond an insured's control and — with a sublimit — losses caused by communicable diseases.
Meanwhile, Ebola also exposed a gap in companies' travel accident and health programs. Travel accident policies typically cover medical evacuation and repatriation of sick or injured employees overseas. Voluntary evacuation of employees threatened by Ebola but not actually ill would not be covered, though.
Insurers also may be prevented from delivering services if an Ebola-infected employee can't be repatriated because a government bars re-entry, according to the Lockton white paper.
In general, any insurer's addition of a specific exclusion of Ebola claims suggests there may be coverage under existing policies, lawyers say. Likewise, the availability of new policies that would cover Ebola claims doesn't mean existing policies don't apply.
“It's often the case that insurance companies, to their credit, will come up with a form of coverage that covers something,” said Jerold Oshinsky, a partner with Kasowitz, Benson, Torres & Friedman L.L.P. in Los Angeles. “But they shouldn't then be allowed to argue that the existing coverage doesn't apply because you had to buy the new coverage.”
The U.S. Centers for Disease Control and Prevention tightened safety rules nationwide for all hospitals that treat patients with Ebola after two nurses contracted the infectious disease when treating a Dallas hospital patient who died earlier this month from the virus.