ILMA Compoundings - July 2020 - 36

WASHINGTON LANDSCAPE

Insurance and COVID-19
By Matthew Levetown

I

n light of the continuing effects
from the COVID-19 pandemic,
businesses have been forced to
adjust rapidly to changing circumstances. Even as the nation resumes
operations, the shape of business
relations will be different from
pre-pandemic days. Commercial
insurance policies are one example.
Many ILMA members will soon be
renewing their policies and should be
on the lookout for changes resulting
from the pandemic.
At press time, the future of
reopening the economy with liability
protections for businesses that worked
hard to support Americans during the
stay-at-home orders remains up in the
air on Capitol Hill. Congress continues to debate passage of COVID-19
liability protections for businesses,
while lawsuits surrounding COVID19 are already being filed under
different legal theories, challenging
the robustness of existing liability
insurance policies. Preventive measures and risk-transfer mechanisms,
such as insurance, afford a great deal
of protection and may help reduce
the burden of potential COVID-19
liability. Confer with counsel to examine your insurance risk pathways and
routes of coronavirus infection in light
of existing policies, and pay attention
to changes in future renewals.
FUTURE EXCLUSIONS
The 2019 novel coronavirus, while
the most disruptive in recent history,
is not the first viral outbreak to
impact business insurance practices,
and it is unlikely to be the last. The
2003 SARS pandemic, though less
impactful than COVID-19, resulted

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JULY 2020

| COMPOUNDINGS | ILMA.ORG

in changes to commercial general
liability as insurance carriers sought
to avoid payouts by finding exclusions
in existing policies. As a result, upon
renewal, many insureds found their
new policies contained language
explicitly excluding viral and bacterial outbreaks and related business
interruptions and general liability. As
viruses and bacteria are different, some
carriers may only exclude one or the
other - though it is hard to imagine
that post-pandemic renewals will make
that distinction.
IMPACT ON POLICIES
Several types of insurance are likely
to face current or future exclusions,
including third-party liability, directors
and officers (D&O), and business
interruption policies. Even if current
plans do not preclude coverage,
carriers may try to rely on pollution
exclusions, which generally avoid liability for injuries caused by workplace
pollutants. However, individual

policies and court rulings are undecided about whether, and to what
extent, viruses constitute "pollutants."
Commercial general liability (CGL)
policies are the most likely ones to need
to be reviewed carefully, because they
typically offer the broadest
protections. However, many CGL
policies include viral exclusions following SARS, and renewals will most
likely have some sort of exclusions for
COVID-19 or novel coronaviruses.
Provisions defending a carrier from
losses due to viruses may not be obvious,
and they can be included as standalone
or microorganism exclusions.
Business interruption insurance
typically applies when losses are
incurred by suspended operations
due to property damage. Considering
that viruses do not typically cause
property damage, claims arising under
interruption insurance are likely
nonstarters, at least for insurance
company lawyers. While viruses may
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