Coronavirus and Insurance Market Implications
The Coronavirus, otherwise known as COVID-19 or Wuhan Flu, is causing incredible havoc to the lives of people and the global economy in general.
This is evidenced in massive swings in the stock market. The S&P ASX 200 Index decreased from a peak of 7,162 on 20th February 2020 to 5,304 on 12th March, 2020 – a drop of 25.94 % in value in less than three working weeks. The last time this type of market behaviour occurred was during the Global Financial Crisis (GFC).
With the train wreck that is besieging us, several clients have asked whether they are insured for loss arising from Coronavirus under their
Business Interruption insurance coverage, and/or
Travel Insurance cover, and/or
Event Insurance, and/or
Workers Compensation insurance
Coronavirus – Business Interruption
Business Interruption provides cover for reduction in Gross Profit following insured damage to a premises. There are several extensions that are available with this coverage.
One extension relates to Infectious Disease. An excerpt of a common wording that applies for this cover is as follows:
Covers loss… resulting from interruption of or interference with the Business arising from closure or evacuation of the whole or part of the Premises by order of a competent public authority consequent upon:
(a) infectious or contagious disease manifested by any person whilst at the Premises; …
shall be deemed to be loss resulting from Damage to Property used by the Insured at the Premises.
Provided that paragraph (a) will not indemnify loss resulting from interruption of or interference with the Business directly arising from or in connection with Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be quarantinable diseases under the Biosecurity Act 2015 (Cth) and subsequent amendments.
So, there is coverage for Infectious Disease – of a certain type – to a certain point. And this coverage would only exists if a Public Authority orders evacuation of the property as well.
COVID-19 was listed under the Biosecurity Act 2015 on 21 January 2020. This automatically triggered an industry wide insurance exclusion.
With the ruling that the Coronavirus is a Human Influenza that has reached Pandemic level, and is now defined as a Quarantinable disease, there is no cover based on standard market wordings.
Coronavirus – Travel Insurance
The major areas of concern in relation to Travel Insurance and the Coronavirus are the
Loss of Deposits or Cancellation section and,
Emergency Medical Expenses section.
In general terms, we are finding
Leisure travel insurance – For individuals or families exclude cover for any loss arising from Coronavirus.
Corporate Travel insurance – Based on the time of booking and prior to issues from the virus becoming foreseeable, Corporate Travel policies which provided broad “unforeseen any loss” cover provided coverage.
To gain perspective, a basic premise of General insurance is the requirement a loss is meant to be unforeseen. When the likelihood of a loss is near or imminent and insurance cover is requested from the insurer, insurers will not provide insurance.
Example: You ring an insurer in the morning to obtain a new insurance policy. The policy insures damage arising from events such as cyclone, bushfire, or flood. It is public knowledge that a bushfire exists, and it is imminent it will reach your property in the afternoon. It is highly likely this will cause damage to the property. On this basis, an insurer will not provide cover.
In recent time, travel is being curtailed by governments in order to reduce likelihood of the Coronavirus spreading.
Coronavirus – Event Insurance
Another potential area of concern is the Cancellation of Events due to the virus and attempt to contain its spread amongst the public. Coverage for the expenses of holding an event can be insured subject to the certain Insured Events.
Unfortunately however, we see that Event Insurance policies have a standard exclusion for Communicable Disease which will typically read as follows:
We do not cover losses directly or indirectly arising out of:
Communicable Diseases any communicable disease which leads to:
the imposition of quarantine or restriction in movement of people or animals by any national or international body or agency; and/or
any travel advisory or warning being issued by a national or international body or agency and in respect of a) or b) any fear or threat thereof (whether actual or perceived).
On this basis, there is no coverage under standard Event policies for financial loss arising from Coronavirus.
Coronavirus – Workers Compensation
Workers Compensation in Australia has different legislation and laws governing each state and territories coverage. However, this appears to be the one area where coverage is available with major caveats.
In short, coverage is provided under Workers Compensation for employees being unable to work due to being diagnosed with COVID-19. However, you must be able to confirm the exposure is connected with work.
In theory, an employer would be taking tests on staff regularly in order to determine if/when their staff have COVID-19 in order to determine how it was caught. In practice, this is not commercially viable or practical due to the potential large scale nature of this issue within the community as a whole.
The onus of proof will be upon the employee to prove the contracting of the virus occurred due to work.
The employee must have an accepted statutory claim and be incapable to undertake work, with this validated by a medical practitioner.
Preventative Actions
Due to the nature of what this virus is, and the difficulties in obtaining insurance coverage, we implore everyone to be proactive in reducing your health risks. This starts with following proper hygiene rules, such as washing your hands with soap and water.
A summary of actions prescribed by the World Health Organisation (WHO) (1) to prevent spread of the virus is as follows:
Regularly and thoroughly clean your hands with an alcohol-based hand rub or wash them with soap and water.
Why? Washing your hands with soap and water or using alcohol-based hand rub kills viruses that may be on your hands.
Maintain at least 1 metre (3 feet) distance between yourself and anyone who is coughing or sneezing.
Why? When someone coughs or sneezes they spray small liquid droplets from their nose or mouth which may contain virus. If you are too close, you can breathe in the droplets, including the COVID-19 virus if the person coughing has the disease.
Avoid touching eyes, nose and mouth
Why? Hands touch many surfaces and can pick up viruses. Once contaminated, hands can transfer the virus to your eyes, nose or mouth. From there, the virus can enter your body and can make you sick.
Make sure you, and the people around you, follow good respiratory hygiene. This means covering your mouth and nose with your bent elbow or tissue when you cough or sneeze. Then dispose of the used tissue immediately.
Why? Droplets spread virus. By following good respiratory hygiene you protect the people around you from viruses such as cold, flu and COVID-19.
Stay home if you feel unwell. If you have a fever, cough and difficulty breathing, seek medical attention and call in advance. Follow the directions of your local health authority.
Why? National and local authorities will have the most up to date information on the situation in your area. Calling in advance will allow your health care provider to quickly direct you to the right health facility. This will also protect you and help prevent spread of viruses and other infections.
Sources: World Health Organisation (1)
About your insurance
For further information in relation to your insurances, please contact your Business Insurance Specialists Account Executive.
About COVID-19
For the latest updates or enquiries in relation to the COVID-19 outbreak you can contact the National Coronavirus Health Information Line on 1800 020 080.
The information provided in this blog is of a general nature only and does not take into account individual objectives, financial situation or needs. If you require advice that is tailored to your specific business, please contact Business Insurance Specialists.
