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Liability policies may respond to coronavirus


While traditional property/casualty insurance policies have limited coverage for outbreaks and epidemics like the coronavirus, businesses need to review their policies and be aware of claims, according to a presentation Wednesday by Marsh LLC.

Beyond workers compensation, property and business interruption, other coverages such as professional liability and pollution liability policies might respond to infectious diseases in specific circumstances, experts said.

“Employers’ enforcement of specific corporate and human resources policies during an outbreak could give rise to claims of discrimination against protected classes,” said Christopher Lang, global placement leader U.S. and Canada, for Marsh LLC, based in New York.

Employment practices liability policies could respond in those cases, he said.

Directors and officers policies could also cover litigation by shareholders alleging “for example a lack of preparedness for the potential effect on corporate operations and earnings,” Mr. Lang said.

“This is a particular concern as event-driven litigation has become a hot topic in the D&O world, he said.

While D&O policies typically include limitations on coverage for illnesses and for bodily injury, these limitations may be “broadly worded,” so policyholders should review and discuss them with their advisers, he said.

Depending on the severity of the disease, organizations might also incur cleanup or waste removal costs and might be forced by government authorities to temporarily close.

“Pollution legal liability policies can respond depending on policy wording and the facts of a claim,” Mr. Lang said.

General liability policies could also cover illness involving customers and other third parties but are “unlikely to cover claims based on fear of exposure without actual symptoms,” Mr. Lang said.

Policyholders need to work with brokers and claims consultants to review their coverage, experts said.

When it comes to property policies if the virus is present on a policyholder’s premises, there could be coverage for decontamination costs, cleanup and interruption by a communicable disease, they said.

However, standard property policies require physical damage to be triggered and typically contain contamination exclusions.

How a business’ property insurance contract may or may not apply “is fact-driven,” said Paul McVey, property claims leader U.S., Marsh LLC, based in New York.

Questions could be asked about exact causation and how the business is affected, he said. “Are we talking straight property damage, time element which would be the business interruption extra expense cover, are we talking about supply chain issues around interdependency?” he said.

On the operations side, a major issue for multinational firms is supply chain risk, and knowing who their critical suppliers are, said James Crask, global resilience advisory lead, Marsh Risk Consulting, based in London.

Businesses need to “pick up the telephone right now and ask their suppliers if they’re affected and/or expect to be affected,” he said.

Firms need to go deeper than key suppliers and ask them about their suppliers, he said, adding: “That’s where the vulnerabilities are. There are hidden exposures in supply chains that are not immediately visible.”

While in the past infectious diseases have been a prominent concern for businesses and risk professionals, that attention and concern has been “short-lived,” said Jaclyn Guerrero, senior epidemiologist, Metabiota Inc., based in New York.

“People and businesses have a tendency to look at events like the current coronavirus outbreak as black swans, but the reality is we see hundreds of notable outbreaks during the last decade and we expect these events will continue to occur as other factors like climate change, population growth and global trade exacerbate infectious disease risk,” she said.

“It’s becoming clear to businesses, governments and health officials that they need to better understand the nature, size and scope of these events,” Ms. Guerrero said.

More insurance and risk management news on the coronavirus crisis here.











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