United States: Avoiding The Insurer Bite: Insurance Coverage For Zika Virus Losses

Named after the Ugandan forest in which it was first discovered, outbreaks of Zika virus have until recently been limited to tropical Africa, Southeast Asia, and the Pacific Islands. The past year, however, has witnessed the rapid spread of Zika virus throughout the Western Hemisphere, including most recently to the continental United States where active local transmission has been confirmed in parts of Miami-Dade County.

Zika virus is transmitted primarily through the bites of infected Aedes species mosquitoes. While Zika virus is not communicated through casual contact, transmission can occur through sexual contact and from a pregnant woman to her fetus. Although those who experience illness from Zika virus usually have only mild and short-lived symptoms, Zika virus infection during pregnancy can cause serious birth defects, including microcephaly, and has been linked to Guillain-Barré syndrome, a rare autoimmune disorder that can result in paralysis.

With the Centers for Disease Control and Prevention ("CDC") having issued travel advisories urging pregnant women and their partners to postpone all nonessential travel to any region where active local transmission of Zika virus has been confirmed, businesses across the Gulf Coast and beyond are understandably concerned about the potential financial impact the continued spread of Zika virus may have on their operations. This concern is most pronounced in the hospitality and travel industries, which are quickly approaching their peak tourist season.

Fortunately, businesses can proactively manage their Zika virus exposure now by carefully reviewing their existing insurance programs to determine whether adequate coverage is afforded for Zika- and other infectious disease-related losses. While the scope of coverage will depend upon the specific terms of each insurance policy, a number of coverages may respond with insurance for the types of Zika virus losses that may soon be experienced by commercial policyholders in the United States.

Business Interruption Insurance

As a consequence of the CDC's recent travel advisories and increasing public fear over potential contraction of Zika virus, businesses located in areas where the presence of Zika-infected mosquitoes has been confirmed may experience significant disruptions as expected patrons make alternative arrangements. Business interruption insurance may respond with coverage for these income losses.

Typically purchased as part of a company's commercial property insurance policy, business interruption insurance is intended to protect businesses against income losses sustained as a result of disruptions to their operations. Contingent business interruption coverage similarly provides insurance for financial losses resulting from disruptions to a business's customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier be of a type covered with respect to the business's own property.

In many commercial property insurance policies, business interruption coverage is triggered when the policyholder sustains "direct physical loss of or damage to" insured property by a covered cause of loss. In the event of a claim for Zika-related business interruption, certain insurance carriers may dispute whether this "physical loss" requirement has been met. Policyholders should keep in mind, however, that courts across the country have not settled upon a uniform rule for when insured property has suffered a "physical loss." Courts in a number of jurisdictions have determined that contamination and other incidents that render property uninhabitable or otherwise unfit for its intended use constitute a "physical loss" sufficient to trigger business interruption coverage. The determination of whether "physical loss" has occurred will therefore continue to require a close examination of the particular facts of each case.

Other specialized insurance policies and extensions of coverage added to standard property insurance policies—including those sold to policyholders in the hospitality and health care industries—expressly provide insurance coverage for losses caused by "communicable or infectious diseases" without requiring physical damage to insured property. Notwithstanding the potential availability of coverage under standard business interruption insurance, businesses especially concerned about the risk of disruptions occasioned by communicable or infectious disease outbreaks should consider whether to also purchase "communicable or infectious diseases" coverage.

In addition, many commercial property insurance policies provide coverage for business income losses sustained when a "civil authority" prohibits or impairs access to the policyholder's premises. Depending upon its specific wording, a policy's "civil authority" coverage may or may not require that the access restriction result from "physical loss" by a covered cause of loss and, if so, often does not require that "physical loss" occur to the policyholder's own property. Accordingly, in the event that a federal, state, or local governmental authority limits access to areas where active transmission of an infectious disease has been identified, "civil authority" coverage may respond with insurance for the attendant income losses of affected businesses.

Liability Insurance: CGL, D&O, E&O, and Workers' Compensation Coverage

As the incidence of Zika virus illness increases, businesses—particularly those in the hospitality industry—could also face claims by infected guests that they allegedly failed to exercise reasonable care in guarding against, or warning of, the risk of exposure to Zika virus. Intended to protect businesses against third-party claims for bodily injury resulting from exposure to harmful conditions, commercial general liability ("CGL") insurance policies should respond with coverage for these claims.

With respect to similar claims for bodily injury brought against a company by its own employees, most states' workers' compensation statutes provide that an employee is entitled to benefits for "occupational diseases." While "ordinary diseases of life" (i.e., those to which the general public is equally exposed) are generally excluded from workers' compensation insurance programs, if an employee can establish a direct causation connection to the workplace, there may be a valid argument for workers' compensation insurance coverage. Although Zika virus is transmitted primarily through mosquito bite (and thus arguably constitutes an "ordinary disease"), there has been at least one reported case of laboratory-acquired Zika virus illness, which could conceivably qualify for workers' compensation coverage. Nevertheless, to the extent that other claims for employee-related Zika virus illness do not qualify for workers' compensation benefits, coverage might be still afforded under certain CGL insurance policies.

In addition to CGL insurance, many health care providers also purchase errors and omissions ("E&O") insurance, commonly referred to as hospital professional liability coverage. These specialized insurance policies protect against damages that the health care provider is required to pay for bodily injury arising out of the provision of, or failure to provide, medical services. Although they typically exclude coverage for bodily injury to employees occurring during the course of their employment (which can be covered under workers' compensation insurance policies), hospital professional liability policies should respond with insurance for Zika virus-related bodily injury claims of non-employees.

For example, the CDC has warned of the strong possibility that Zika virus can be spread through blood transfusions. Because of the high rate of asymptomatic infection, the Food and Drug Administration has also recently issued a revised guidance to prevent the spread of Zika virus through the nation's blood supply, which calls for blood collection centers to perform laboratory screening of all donated blood. Liability for bodily injury arising out of the failure to adequately screen donated blood, or warn of the potential risk of Zika virus transmission through blood transfusion, may thus be covered under a health care provider's professional liability insurance policy.

In addition to third-party claims brought against businesses themselves, a company's directors and officers may be subjected to shareholder lawsuits alleging that their unreasonable actions (or inaction) in response to Zika virus or other infectious disease epidemics caused the company economic loss. In particular, a company's shareholders may contend that management allegedly failed to develop adequate contingency plans, allegedly failed to observe protocols recommended or required by governmental authorities, and/or allegedly failed to properly disclose the risks Zika virus posed to the company's business and financial performance. Directors and Officers ("D&O") insurance policies may provide coverage for the costs and liabilities arising from these shareholder lawsuits.

Although the majority of D&O insurance policies exclude claims for bodily injury (with some exclusions worded more broadly than others), when afforded a "strict and narrow construction," as they must be under the laws of most states, such exclusions should not preclude insurance coverage for shareholders' economic loss claims. Nevertheless, policyholders should be mindful of the fact that insurers may attempt to invoke certain D&O policies' so-called "absolute" bodily injury exclusions (e.g., excluding coverage for any claim "based on, directly or indirectly arising out of, or relating to actual or alleged bodily injury") to deny coverage for shareholder claims with any connection to a Zika virus-related bodily injury, no matter how attenuated. At the time of purchase or renewal, policyholders should therefore consider negotiating the removal of this "absolute" language or the addition of carve-outs to the exclusion that expressly preserve coverage for shareholder claims.

Along the same lines, policyholders should also examine the scope of their D&O insurance policies' "conduct exclusions." Many D&O insurance policies exclude coverage for certain misconduct by the insured, which can include deliberate fraud, dishonesty, and willful violations of the law. The particular language of these "conduct exclusions" can become significant if company management's response to the Zika virus risk becomes the subject of shareholder litigation. Certain D&O policies require only that the proscribed conduct occur "in fact," while others provide that the exclusion applies only if the insured's misconduct is established by "final adjudication." Neither formulation of the exclusion is ideal from a policyholder perspective, as insurers may attempt to take the position that they themselves can determine the exclusion's application (under the "in fact" trigger) or have the exclusion's application determined through insurance coverage proceedings (under the "final adjudication" trigger). Where possible, policyholders should accordingly seek to have any conduct exclusions in their D&O insurance policies expressly worded to apply only if the insured's misconduct is determined through a "final, non-appealable adjudication in the underlying action," which should foreclose an insurer from attempting to trigger the exclusion absent a conclusive determination in the underlying litigation.

Conclusion

While the foregoing has surveyed the various types of insurance that may respond with coverage for Zika virus and other infectious disease losses, the scope of coverage will ultimately depend upon the specific language of each insurance policy. Businesses interested in proactively managing their Zika virus exposure will accordingly be well-served to evaluate the adequacy of the coverage provided under their existing insurance programs before the potential onset of such losses.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions