As a result of COVID-19, communicable disease exclusions are now standard on property and business interruption policies and some liability covers. Heidi Dennis, Public Sector Leader – South at Aon, explains how this affects organisations and the steps they can take to manage the risk.
As the possibility of a pandemic grew back in early 2020, insurers started to get nervous about their potential exposure, adding communicable disease exclusions to wordings. But, while concerns over the pandemic were the cause of this reaction, the exclusions go much further than ruling out claims relating to COVID-19.
Now standard on property and business interruption policies, the exclusions go beyond COVID-19 and other coronaviruses, excluding any infectious or communicable disease that might trigger a claim. This includes Legionnaire’s disease, mumps and scarlet fever – all of which would previously have been covered.
The exclusion is for actual outbreaks and fear of contamination with most policies still covering loss of income arising out of murder, food poisoning, defective sanitation and vermin at the premises.
As well as responding to the losses insurers had already realised, and those they would have been liable for if their policy wordings covered all diseases, this action also served to make it absolutely clear that pandemics are not an insurable risk.
Following the property and business interruption losses, insurers started looking at the potential implications of employees and members of the public bringing claims alleging that they had contracted COVID-19 in a shop, hospital, care home or other public space as a direct result of the employer, owner or occupier not taking adequate care.
At first, it was thought it would be difficult to prove that the virus had been contracted in a particular location. However, as events unfolded, it became clear that claims would be made and insurers would have to defend or handle them.
The onus is still on the claimant to establish a direct and clear connection between the illness and the location and to prove that there was no other way the virus could have been transmitted.
In most cases, this will be difficult but it is likely that care homes, nursing homes and residential homes will be targeted due to their enclosed nature and the high number of cases they saw during the pandemic. Given this, insurers were quick to exclude these potential losses, resulting in the near collapse of nursing home insurance policies as premiums, deductibles and restrictions saw huge increases.
Inevitably, the rest of the insurance market is also adding exclusions to public liability policies and, where it’s not statutory, employers’ liability. If your liability policy now has a communicable disease exclusion, you should have been advised of it in your renewal pack and we recommend reading the wording carefully.
Again, these exclusions appear to be total but they have been challenged for their definition and real meaning. For instance, where visitors were injured at council locations, schools and sports centres due to a trip or slip that was nothing to do with the vaccine or cleaning regime, but the site was being used for vaccinations or testing.
Not all insurers are imposing an exclusion and it has been possible in some cases to have it removed or amended. This could be by providing more detail on the risk management provisions in place; through negotiation or where the business is placed in a tender and the insurer is competing for the business.
Managing the risk
With communicable diseases excluded from insurance cover, it’s important to carry out risk assessments to ensure that offices work and public spaces are safe. This should also involve running assessments on services and facilities which may have been unused for 18 months, including water systems, air conditioning, cooking facilities and foodstuffs.
Advice on this is available on government websites such as the HSE’s coronavirus: working safely page (Coronavirus: latest information and advice - HSE news).
Aon can also offer assistance in this area. Our risk engineers can carry out a review of your risk management processes to ensure they are comprehensive and robust. We also provide information and advice on our COVID-19 Insights & Resources page (COVID-19 Insights & Resources | Aon) to help organisations manage this risk.
To find out more about how communicable disease exclusions affect your cover, and the steps your organisation can take to manage this risk, speak to your Aon account manager or contact Heidi Dennis at email@example.com