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ASZ International, Inc.

200 Summit Lake Drive
Suite 220
Valhalla, NY 10595

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Coronavirus and General Liability Claims

Even though questions pertaining to how the General Liability policy will respond to COVID-19 has been limited, it is still important that it is addressed.

Legal Liability Required
To lead into the CGL’s response to the coronavirus, one key fact must be understood. If there is no legal liability, coverage is not triggered in the CGL and the policy will not respond. Legal liability exists when:

1. The wrongdoer is found guilty of “Negligent Conduct” (meaning they breached a duty owed to the injured party); 

2. The injured party suffers actual damages; and

3. The wrongdoer’s “Negligent conduct” is the proximate cause of the injury or damage.
 
Far more than these triggers are required to ultimately establish legal liability, but such detail is not the focus of this article.

Was There an “Occurrence”?
A second requirement contained within the insuring agreement plays a role in the CGL’s response to any injury supposedly arising from the coronavirus – the injury must qualify as an “occurrence” before the policy responds. The CGL form reads:

b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”
 
Within the CGL an occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Is contracting a virus an occurrence within the policy form?
To decide if this qualifies as an “occurrence” the question must be asked, is passing along a virus an accident? Maybe, but there are too many variables are involved to provide a definitive answer. As part of the question of an “occurrence,” the injured party has to prove that the virus was contacted at the insured’s premises or arising from its operations. Given the specifics, this might be almost impossible.

For sake of the overall discussion, assume making another person sick qualifies as an “occurrence” in the CGL, and that the person is able to prove that his/her only exposure was at the insured’s locations or a result of the insured’s operations. 

If the insured is legally liable if there is an occurrence as defined in the CGL and if the exposure can be narrowed down to the insured, the next step is to look for exclusions within the CGL.

Are There Any Exclusions?
Review the exclusions in the unendorsed CGL and only one exclusion could possibly negate coverage for spreading the coronavirus to members of the public, exclusion 2.a. Expected or Intended Injury. For example, if the insured requires an employee to continue working or come to work who is known to be infected, spreading the virus should be expected (even if not intended). No coverage due to the exclusion.

If, however, the expected or intended injury exclusion does not apply, there do not appear to be any other exclusions applicable to the spreading of the coronavirus. Although some enterprising claims person would surely try to use the pollution exclusion.

This leaves us with the impression that the CGL may provide coverage for infecting a third in certain circumstances. But this is not necessarily true.

A Common (Ubiquitous) Exclusionary Endorsement
Even if an incident leading to bodily injury from coronavirus clears all the required hurdles (the insured is legally liable, the incident qualifies as an occurrence, the injured party can prove the exposure is the from the insured’s actions, and the claim is not hindered by the expected or intended injury exclusion), there is still one roadblock – an exclusion common to most CGL policies – the CG 21 32 05 09 – Communicable Disease Exclusion.

Undoubtedly the question to be answered is, does a virus qualify as a disease? In a “roundabout” way, yes. It’s not the virus that causes harm, it’s the disease that results from the virus. The immune system destroys some viruses before they can cause any harm, but some viruses overpower the immune system and lead to sickness (disease).
When the CG 21 32 is attached, there is no coverage for the transmission of the coronavirus and the resulting sickness (disease).

How is the CGL Going to Respond to the Coronavirus?
Without overstating the reality, it seems rather unlikely that a CGL policy will ever pay a claim arising from the coronavirus. The facts may negate any possibility that the insured is legally liable for spreading the virus/disease. And even if the insured is legally liable, does spreading a virus actually qualify as an occurrence as defined in the policy? If these two insuring agreement conditions aren’t met, there is no need to go any further into the coverage form because there is no coverage.

In order to put your business in the best possible position ahead of a decision about a CGL claim, adhere to the following best practices.

Document and report claims immediately. Without ample notice and prompt filing, coverage will likely be denied. There is no downside to filing claims as soon as possible. Doing so ensures that your business will be in the right place when applicability of CGL coverage claims are resolved.

Provide comprehensive details surrounding each claim. File each claim with as much detail as possible to ensure thorough review of your coverage and unique scenario by the carrier.

Record each individual claim by line of coverage. Doing so will make it easier to monitor carrier response internally and simultaneously provide your carrier with a simplified way to absorb multiple claims from your business.

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