United States: Homeowners Liability Insurance Coverage For Coronavirus-Related Claims

This article also appeared in the Memphis Business Journal.

The coronavirus has quickly spurred significant changes in most people's daily lives and routines.  In light of the widespread closure of public places and a growing number of safer-at-home orders, nearly everyone has found themselves spending much more time at home.  Residential deliveries have surged, and many Americans have construed social distancing guidelines to permit small gatherings of friends and families inside homes.  But what if an insured with coronavirus exposes someone to the virus?  Or what if a guest becomes infected with coronavirus at an insured's home?  These interactions could result in an uptick of homeowners liability insurance claims arising from an insured causing someone to be exposed to COVID-19.

As with all insurance coverage evaluations, the first step is determining whether the insuring agreement has been met.  Most homeowners policies protect the insured from an "occurrence," which policies typically define as bodily injury or property damage caused by an "accident."  However, the specific language and terms of a policy will determine the particular coverage provided.  Likewise, jurisdictions across the country have interpreted these provisions in divergent ways, especially in regard to what qualifies as an "accident."  Importantly, many homeowners policies contain communicable disease exclusions—which would likely bar the majority of coronavirus-related claims—but some do not.  In the absence of a communicable disease exclusion, several courts have determined that homeowners policies cover the negligent transmission of and exposure to similarly communicable diseases.  See, e.g., N. Star Mut. Ins. Co. v. R.W., 431 N.W.2d 138 (Minn. Ct. App. 1988).

Whether Exposure to Coronavirus Was Caused by An Accident

The term "accident" is not usually defined in insurance policies.  Therefore, the term is given its common and ordinary definition.  In many states, negligent acts are not excluded from the term "accident," but virtually every homeowners policy contains exclusions barring (1) expected or intended bodily injury and (2) willful and malicious conduct resulting in bodily injury.  Accordingly, where someone is accused of intentionally exposing or infecting another with coronavirus, such conduct would typically be excluded from coverage.  Coverage can be denied for an insured's intentional conduct under either the "expected or intended" exclusion or the "willful and malicious" exclusion.  The expected or intended exclusion is typically governed by whether the insured subjectively expected or intended the bodily injury caused by their actions.  While an act may be intended, it is not expected or intended if the insured did not intend the resulting injury.  Unlike the expected or intended exclusion, the willful and malicious exclusion applies an objective standard, and the terms "willful" and "malicious" are interpreted based on their plain meaning.

There is some debate as to whether the intentional acts exclusion bars coverage when a complaint also alleges negligent conduct.  Even where allegations of intentional conduct are asserted, many claimants will usually also allege a negligence claim because most states follow the rule that if any part of the complaint is covered under the policy, then the insurer must provide a defense for all allegations.  Put another way, the inclusion of a negligence claim triggers a duty to defend, even if intentional conduct is also alleged.  However, the claimants' use of the term "negligence" in the complaint is not always outcome-determinative if the underlying conduct is deemed intentional.  See, e.g., McCauley v. Estes, 726 So.2d 719 (Ala. Civ. App. 1998).  Again, this is state-specific, and some states deem the allegations of the complaint dispositive, at least for determining duty to defend.

Depending on the specific facts giving rise to the claim, allegations of an insured's negligence in exposing another to coronavirus could very well be construed by some courts as a covered "accident" to trigger the insured's homeowners coverage.  However, because there have been such extensive directives from the government and in the news to prevent exposure to the virus, especially to those who are immuno-compromised, the particular facts giving rise to a claim would have to skirt around foreseeability issues in order for the insured's conduct to be deemed an accident.

Covered "Bodily Injuries" Beyond Contracting Coronavirus

While courts have recognized countless communicable diseases as "bodily injuries," it is possible that fear of becoming infected with coronavirus may also qualify as a covered bodily injury.  See, e.g., Clarke v. State Farm Fla. Ins., 123 So.3d 583 (Fla. Dist. Ct. App. 2012) (considering herpes as bodily injury excluded under language of policy).  Attempting to avoid the intentional conduct exclusion and to increase their shot at triggering the defendant's homeowners coverage, some plaintiffs elect to assert negligent infliction of emotional distress claims based on the insured's intentional conduct.  Though the outcome of this strategy tends to be unclear, it is more likely to succeed in jurisdictions that recognize negligent infliction of emotional distress claims and where such injury is included as a covered injury under the policy.  See Am. Prot. Ins. Co. v. McMahan, 562 A.2d 462 (Vt. 1989) (finding that insured had duty to defend under homeowners policy because exposure to toxic substance constituted bodily injury and emotional distress was covered).  But see Aetna Cas. & Sur. Co. v. Sheft, 989 F.2d 1105 (9th Cir. 1993) (determining that where insured did not disclose that he had AIDS before having sex with plaintiff, expected or intended exclusion barred coverage because insured must have expected plaintiff to suffer physical or emotional injury from such activity).  In addition, some policies define bodily injury as mental anguish or emotional distress, but only if accompanied by some physical injury, as well.

Additional Barriers to Coronavirus Coverage

Even if a claimant can get past the expected or intended and willful and malicious exclusions, one's exposure to coronavirus may not be covered if it arose out of the insured's business pursuits.  The business pursuits exclusion appears in most homeowners policies, which typically define "business" to mean a trade, profession, or occupation.  For example, Alabama courts have interpreted a "business pursuit" as "a continued, extended, or prolonged course of business or occupation."  Woodall v. Alfa Mut. Ins. Co., 658 So.2d 369 (Ala. 1995).  With so many people working from home during this coronavirus pandemic, there is a possibility that even if the insuring agreement might be triggered, coverage could be still be excluded if one's exposure to coronavirus was in any way related to their job.

What's Next

Although staggering numbers of people have and continue to become infected with COVID-19, the high costs of litigation will probably deter many would-be claimants from commencing litigation.  Nonetheless, claims are more likely to be filed where someone died from the virus, especially where such people had eggshell-like compromised immunity issues.  While homeowners policies with communicable disease exclusions will probably bar any coronavirus-related claims, the specific facts giving rise to a claim will largely drive any coverage analysis, especially the "accident" determination, under a policy without the exclusion.

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.