Swine Flu – Are You Covered?

With the instances of H1N1 Influenza 09 (Human Swine Influenza) increasing by the day, business management are advised to prepare continuity plans to deal with the possible impact on their business and to ensure sustainability. The disease has the potential to affect the largest of organisations down to the sole trader. There is the potential for serious losses in productivity if staff and business operations are exposed to the illness.

In addition to taking the necessary precautions with staff and clients to reduce the spread of illness within the business, management should consider its insurance coverage. It is likely that a pandemic will arise sooner or later, so it is prudent as part of your risk management to ensure that your business is covered from the potential consequences.

Your Business

As the prevalence of the disease increases so does the risk of a business being closed down causing significant impact. If a business is forced to close and cease operating, will the policy of insurance obtained to cover your business respond to the losses incurred?

Policies of insurance differ quite dramatically from insurer to insurer and it is prudent to review your specific policy. Generally, business insurance requires damage to property before cover arises under the policy for business interruption. It is unlikely that the outbreak of a virus at your premises will constitute 'property damage' in order to be covered for business interruption. That said, some insurers provide an additional benefit or extension to the cover for business interruption offered without the need for property damage.

For example, a common extension in an Industrial Special Risks Insurance Policy (Mark IV) is for loss resulting from infectious or contagious diseases¹. The extension will often cover a business for losses resulting from interruption of or interference directly or indirectly arising from:

• human infectious or contagious disease manifested by any person whilst at the premises
• the outbreak of a notifiable human infectious or contagious disease occurring within the immediate vicinity of the premises.

Such losses will be deemed to be losses resulting from damage to property and covered. However, there is often exclusion associated with this clause. Some policies will exclude any quarantinable disease or avian influenza (H5N1). Insurers may similarly seek to include a specific swine flu exclusion. If your policy contains this type of deeming provision extending cover, then your business may be covered despite the lack of physical damage. Additionally, there is specific cover available for loss of attraction which is less common but much broader. This extension may cover actual loss sustained from the cancellation of or inability to accept bookings for accommodation and/or a cessation or diminution of trade due to a loss of potential customers as a direct result of, amongst other things, contagious and/or infectious disease.

The Public

In circumstances where third parties are affected in connection with a business' premises or operations, its public liability policy may be triggered to cover the scenario. In order for a public liability policy to respond it is necessary for there to be legal liability. It is difficult to see how a business could be legally liable to a third party provided it has not deliberately or negligently exposed a third party to the disease. That said, each instance needs to be determined on a case by case basis depending on the specific facts and wording of your policy. Generally, public liability policies will not exclude events involving the outbreak of viruses. However, your policy may contain other exclusions or conditions which could be applicable, such as the condition for reasonable precautions/care.

Your Staff

If your staff contract the disease in the workplace, your statutory workers compensation policy may respond. However, each state and territory is governed by their respective legislation. Most jurisdictions include a requirement for the injury or disease to arise out of or in the course of employment. In some jurisdictions, such as New South Wales, there is a requirement for employment to be a substantial contributing factor to a worker's injury.

Provided the requisite connection with the worker's employment exists, it is possible that your employees may be covered by your workers compensation policy. Health workers and those dealing with the public at large who come in contact with carriers of the disease may be able to establish this requirement. If an employee contracts the disease in circumstances unrelated or incidental to his/her employment then it will be difficult for the employee to establish the connection. Obviously, a typical office worker who contracts the flu is not covered by workers compensation.

It is prudent for employers to report to their workers compensation insurer any instance of the disease which is claimed to have arisen as a result of an employee's employment in accordance with the statutory requirements.

Travel

If travel is necessary then it is prudent to review your travel insurance arrangements. Insurers may look to include exclusions to limit cover for Human Swine Influenza. However, if travel insurance was purchased prior to the outbreak it is unlikely the Human Swine Influenza was specifically excluded. Once again, we recommend that the specific policy wording be considered.

Review of Cover

We stress that policies of insurance can differ and whether your business is covered will depend on the specific wording of your policies of insurance. However, as part of your risk management strategies and review of policies and procedures in light of the current challenge, it is wise to review your business cover to determine whether you are covered and whether cover is required for your business. Not only is it timely given the current circumstances but it will also hold you in good stead moving forward and combating the risk of a pandemic in the future.

Footnotes

1. This type of exclusion has been considered in the decision of Cat Media Pty Limited v Allianz Australia Insurance Limited [2006] NSWSC 423.

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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.