The World Health Organization has declared the coronavirus (COVID-19) outbreak as a global pandemic. With that in mind, we have prepared relevant information for insurance companies, insurance brokers and policyholders to help identify the most relevant Q&A for separate insurance lines.
Note: Insurance policies may have different coverage, so we recommend analysing each contract individually.
Situation: insured persons who have left the country and cannot return to their permanent place of residence (for example, quarantined and prohibited from leaving the country) are incurring expenses for accommodation, travel ticket exchange, medical treatment and so on.
Relevant questions: Does travel insurance cover the cost of treatment for the coronavirus (such as research and inpatient treatment costs) inside and outside the European Union? What costs would be covered, if the insured is unable to return to their country of residence due to the coronavirus (e.g. hotels, new return tickets, medicines)?
Answer: in each case insurance cover should be evaluated (whether it covers return costs or not), as well as uninsured events and uninsured objects listed in the terms and conditions. Pandemics and epidemics might be foreseen as an exception that would exclude cover. The date of the insurance contract is also important. In some foreign countries practice and interpretations have emerged that the effect of the coronavirus in certain areas is already an incident that has occurred and thus is uninsurable.
Health insurance (voluntary)
Situation: insured persons want to voluntarily test themselves for the coronavirus and to be reimbursed by their insurer for costs incurred.
Relevant questions: does health insurance cover the costs if the insured chooses to undergo medical examination for the coronavirus at their own discretion? Would the cost related to coronavirus treatment (e.g. medicines, special care) be covered by health insurance?
Answer: Terms and conditions often note that a medical condition caused by a pandemic is an uninsured event. Therefore, the cost of tests for the illness should be covered but the cost of treatment should not.
Commercial general liability insurance
Situation: Due to negligence by company employees, third parties are infected with the coronavirus (e.g. through production or contact with these third parties).
Relevant questions: would third-party claims for material and non-material damage be covered if it is found that a third person was infected with coronavirus due to the actions of a specific company’s employees or products offered?
Answer: coverage would be valid but whether the company was acting intentionally or negligently in violation of the instructions given by the state authorities should be individually assessed; if so, this would exclude cover.
Directors & Officers (D&O) liability insurance
Situation: company directors & officers of the company fail to follow or violate instructions given by the state authorities, resulting in fines and claims against the manager of the company for losses incurred.
Relevant questions: what is the scope of D&O insurance cover for claims against a company which are related to the coronavirus and decisions made by the company? Would state fines be covered? Would legal costs for defending claims connected to the coronavirus be covered?
Answer: usually, a pandemic as a circumstance is not exempt, so insurance cover should remain in force. However, individual assessment should be carried out to establish whether director’s & officer’s actions intended to cause harm and whether their actions could be equated with gross negligence. If so, insurance cover does not apply.
Employer’s liability insurance
Situation: because a company does not provide a safe working environment and fails to organize work remotely, employees are infected with the coronavirus by each other.
Relevant questions: will Employer’s liability insurance cover employees’ claims for material and non-material damage because of lack of a safe working environment and spread infection of coronavirus in the company?
Answer: diseases are not usually covered (usually only personal accidents are covered).
Business interruption insurance
Situation: a company cannot conduct business as usual in respect of state authorities’ decisions related to the coronavirus. As a result, the company suffer outages and other damage.
Relevant questions: will business interruption insurance cover coronavirus-related losses suffered by the company?
Answer: usually an insured event is connected with physical damage to a company’s property and thus is unlikely to qualify as an insured event.
Event cancellation insurance
Situation: events are cancelled due to the coronavirus, and ticket purchasers claim refunds.
Relevant questions: does cancellation of an event due to the state authorities’ decision qualify as an insured event?
Answer: decisions by the state authorities and resulting damage are often uninsured events.
Situation: a policyholder fails to fulfil their obligations due to the coronavirus, as a force majeure event, which results in a claim by a third party.
- Relevant questions: does surety insurance cover losses due to default in the event of declaration of a coronavirus pandemic?
Answer: no, if the policyholder is affected by a force majeure event.
- Relevant questions: under what circumstances can the coronavirus be recognized as a force majeure event and on that basis losses incurred be recognized as an uninsured event by the insurer?
Answer: please read here.
Situation: a debtor does not pay for goods delivered due to the coronavirus, as in cases of force majeure.
Relevant questions: would credit insurance cover loss suffered by the insured if the coronavirus was recognized as a force majeure event?
Answer: no, although it is necessary to establish whether the debtor’s failure is really recognised as a force majeure event.
If you have any questions related to insurance terms and conditions and/or their interpretation, the Sorainen team is ready to assist you to discuss your concerns.