I. INTRODUCTION

A. The Impact of the Coronavirus and the Resulting Sickness or Disease

Since the "coronavirus" was first identified in Wuhan, Hubei Province, China, the World Health Organization ("WHO") has confirmed that more than 110,000 people have been infected with the SARS-CoV-2 virus and more than 3,000 people have died from the resulting COVID-19.1

WHO also has reported that 45 countries have adopted health measures that "significantly interfere with international travel."2 Additionally, many countries, or provinces or states in countries, have imposed quarantines or travel restrictions.

As SARS-CoV-2 has spread, there have been suspensions and disruptions of factory operations and supply lines, cancellations of conferences, concerts and music festivals, and meetings, closures of motion picture theaters, cancellations of and restrictions on sporting events, a substantial drop in attendance at sporting events, movies, concerts, theater shows, attractions, and restaurants, closings of business and schools, and the widespread adoption of temporary telecommunicating/"work from home" policies. The economic losses are projected to be at least in the hundreds of billions of dollars with disruptions potentially lasting for two years.

Furthermore, lawsuits already have been filed, seeking damages for alleged exposure to SARS-CoV-2—likely the proverbial "tip of the litigation iceberg."

B. The Virus and the Disease That May Result

Various terms have been used to describe the coronavirus. The virus is not the same as the disease that may result, and the distinction between the two may be extremely important in accessing insurance coverage.

WHO has named the virus and a resulting disease:

Official names have been announced for the virus responsible for COVID-19 (previously known as "2019 novel coronavirus") and the disease it causes. The official names are:

Disease

coronavirus disease (COVID-19)

Virus

severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2).3

WHO also has provided a straight-forward example of the distinction between a virus and a disease:

Viruses, and the diseases they cause, often have different names. For example, HIV is the virus that causes AIDS. People often know the name of a disease, such as measles, but not the name of the virus that causes it (rubeola).

There are different processes, and purposes, for naming viruses and diseases.4

Other sources also distinguish between an infection and a disease, recognizing that an infection is not a disease. See, e.g., https://qiuzlet.com/251784537/infection-vs-disease-flash-cards/ ("Does infection and disease have the same meaning? NO").

The insurance industry long has recognized the distinctions, too. For example, general liability policies have, for decades, typically distinguished between "sickness" and "disease," usually defining "bodily injury" to mean "bodily injury, sickness or disease." Therefore, when an exclusion references "disease," but not "sickness," a court may be reluctant to apply the exclusion to something that many would perceive as a sickness or illness, whether it be a cold, the flu, or a SARS-CoV-2 infection. See Safeco Ins. Co. of Am. v. Robert S., 26 Cal. 4th 758, 764 (2001) ("[W]e cannot read into the policy what [the insurer] has omitted. To do so would violate the fundamental principle that in interpreting contracts, including insurance contracts, courts are not to insert what has been omitted."); Fireman's Fund Ins. Co. v. Atl. Richfield Co., 94 Cal. App. 4th 842, 852 (2001) (an insurer's "failure to use available language to exclude certain types of liability gives rise to the inference that the parties intended not to so limit coverage"; if an insurer chooses "not to include limiting language," then the words it uses will not "support [the insurer's] position regarding an intent to limit coverage").

Also, insurance policies generally are to be interpreted as understood by a layperson. Therefore, if the "ordinary" person would consider COVID-19 to be a "sickness" rather than a "disease" (much as people do with a cold or the flu), a technical interpretation to the contrary should not be adopted when it would limit coverage. See AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807, 821 (1990) ("The 'clear and explicit' meaning of [policy] provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage' controls judicial interpretation.") .

Thus, while the differences between a "virus," a "sickness," and a "disease" might not seem important, for insurance purposes, such distinctions may determine the availability and scope of coverage.

C. Possible Insurance Coverage

One question now frequently raised is whether insurance covers any of the losses and actual or possible claims and lawsuits associated with SARS-CoV-2 and COVID-19. The answer is, "It depends—but frequently yes." That coverage may be found in insurance policies that otherwise might be overlooked because of overly broad interpretations of exclusions applicable, for example, to "communicable diseases," or because of notions that the presence of a virus does not constitute physical loss of or damage to property. Some insureds also might assume (or insurers might say) that because they do have a particular type of insurance (such as event cancellation), or because some of the insurance they have may have an applicable exclusion, other insurance policies will not apply. However, as explained below, many common types of insurance, such as property, general liability, and workers' compensation insurance may provide coverage, even in areas far removed from outbreaks. In fact, steps taken to minimize exposure to SARS-CoV-2 or to reduce its spread may trigger insurance coverage under multiple types of insurance policies.

Several types of insurance may provide coverage. They include:

  • Event Cancellation Insurance: Event Cancellation insurance covers losses caused by the cancellation or postponement of events because of insured risks. While many policies include potentially applicable exclusions or limitations, many exclusions will not apply so broadly as insurers may contend. This insurance may provide a valuable financial resource, particularly as cancellations mount.
  • Property Insurance: Property insurance covers damage to or loss of property. Based on court decisions over the years, the presence of SARS-CoV-2 in premises or at a location may be deemed to constitute physical loss of or damage to property covered by property insurance policies. This means that if an insured suffers interruptions, or loss of business, because of the presence of SARS-CoV-2 somewhere else in the world, its property insurance policies may pay. In fact, property insurance policies may provide coverage when there are economic losses because of SARS-CoV-2 or Covid-19 outbreaks, quarantines, government orders interfering with operations, supply chains, or customers, or restrictions that make travel more difficult to events or that interfere with an insured's ability to continue with planned events or deliver goods or services. Putting it simply, if an insured is suffering losses relating to SARS-CoV-2, Covid-19 or their effects, its property insurance may apply.
  • General Liability Insurance: General liability insurance typically covers claims or suits for bodily injury, property damage, and various instances where the ability to use, occupy, or enjoy property is compromised. In many versions of this insurance, coverage also is afforded for claims of emotional distress. These policies may apply not just when claims are made or lawsuits are filed, but also to steps taken to reduce the possibility of exposure to SARS-CoV-2.
  • Workers Compensation and Employers' Liability: Workers compensation and employers' liability typically provides coverage for "bodily injury by accident or bodily injury by disease." This coverage may be implicated both by SARS-VoC-2 and COVID-19. It also may apply to the costs incurred to reduce employees' exposure to SARVS-VoC-2.
  • Political Risk Insurance: Political Risk insurance covers losses arising from the activities of foreign governments. One common type of political risk insurance protects against losses when contracts are "frustrated" by the laws, regulations, or orders of foreign governments when those laws, regulations, or orders (no matter how well-intentioned) interfere with contracts. Another provides coverage when a debtor is unable to pay its debt.

We provide below an overview of each of these types of insurance. We also discuss coverage for the costs of reducing losses. And, we highlight some of the timing requirements and other procedural requirements that, if not complied with, may jeopardize coverage.

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Footnotes

1. https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200310-sitrep-50-covid-19.pdf?sfvrsn=55e904fb_2.

2. Id.

3. https://www.who.int/emergencies/diseases/novel-coronavirus-2019/technical-guidance/naming-the-coronavirus-disease-(covid-2019)-and-the-virus-that-causes-it.

4. Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.