Will Standard Commercial General Liability Insurance Cover COVID-19 Claims?

For better or worse, the COVID-19 pandemic has increased our awareness of the danger of contracting illness through viruses and, as a direct result, the standard of care businesses must provide to protect employees and customers has changed.  Further, it is possible, if not likely, many of the enhanced systems and procedures imposed by governmental action or developed by businesses to protect their employees and customers during the pandemic will be continued even after the pandemic has subsided.  After all, the novel coronavirus is but one of many viruses, including various strains of influenza, that can infect employees or customers at any time.  While the appropriate standard of care for businesses will not be “one size fits all,” businesses of all types will be expected to do what is reasonable to minimize the likelihood of spreading diseases.  (For further discussion of this topic, see Evolving Standards of Care in the Era of COVID-19)  Those who fail will be subject to lawsuits and potential liability.

Indeed, customers and employees already have filed lawsuits alleging injuries or death due to exposure to COVID-19.  At least two cases have been filed on behalf of passengers who claim to have contracted COVID-19 because cruise lines failed to require crew members to wear masks or to enforce social distancing during cruises.  See Archer v. Carnival Corporation, Case Number 3:20-cv-2381, U.S. District Court for the Northern District of California; Nedeltcheva v. Celebrity Cruises Inc., Case Number 1:20-cv-21569, U.S. District Court for the Southern District of Florida.  In Illinois, the family of a Walmart employee who died after contracting COVID-19 due to exposure to the novel coronavirus has filed a lawsuit claiming, among other things, Walmart failed to screen and to protect workers adequately. Toney Evans, Special Administrator of the Estate of Wando Evans v. Walmart Inc. et al., case number 2020-L-003938, in the Circuit Court of Cook County.  We should not be surprised to see similar claims filed against other types of businesses.

Plaintiffs filing these types of lawsuits may lose more often than they win; however, even if the risk of an adverse judgment is low, a business still must incur the cost of defense, which may be substantial.  Thus, businesses should review their commercial general liability (“CGL”) policies to determine whether they cover claims related to the spread of an infectious disease.  An insurance policy is a contract and coverage will be defined by its terms; however, the terms may not be entirely obvious or clear, especially to the layman.  Thus, to determine the scope of coverage it may have for claims based on infectious diseases, a business should consult with its insurance broker and its legal counsel.

Subject to the preceding caveat, we can get a pretty good idea of the lay of the land by reviewing the standard form of CGL policy, which is used by most insurance carriers.  Section I (Coverages), Coverage A (Bodily Injury And Property Damage Liability) of a standard form of CGL policy provides coverage for a claim of bodily injury that qualifies as an “occurrence.”  Specifically, it states:

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.”

The standard form of CGL policy defines an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

So, is contracting a virus an “occurrence” within the meaning of the standard CGL policy form?  The answer may be “yes” if the claimant alleges the business accidentally caused him or her to contract a disease.  While it will be easy for claimants to allege they contracted a disease at the insured’s premises or arising out of its operations, proving it will be a very different, often insurmountable, challenge.

Assuming, for the sake of argument, contracting a disease is an “occurrence” and therefore within the scope of the CGL policy’s insuring agreement, coverage for such an injury may nonetheless be excluded.  A standard CGL policy includes an exclusion for “expected or intended” injuries.  The types of allegations that would support a claim against a business for spreading a contagious disease likely would be “expected,” if not “intentional.”  For example, if an insured business does not send employees with fevers home or fails to sanitize oft-used surfaces, then would it not be “expected” these actions would transmit disease to customers?  In sum, if a reasonable person should expect a virus to spread because of actions taken or decisions made, this exclusion is likely to apply.

Even if an incident leading to bodily injury from a disease qualifies as an “occurrence,” the injured party can prove it contracted the disease due to the insured’s actions or inactions, and the claim is not barred by the “expected or intended” injury exclusion, indemnity coverage for the claim still may face another barrier—the Communicable Disease Exclusion (CG 21 32 05 09), which is found in some CGL policies.  It provides in part that coverage does not apply to:

“Bodily injury” or “property damage” arising out of the actual or alleged transmission of a communicable disease. This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the: a. Supervising, hiring, employing, training or monitoring of others that may be infected with and spread a communicable disease; b. Testing for a communicable disease; c. Failure to prevent the spread of the disease; or d. Failure to report the disease to authorities.

If a business’s CGL policy contains this exclusionary endorsement, then any claim for bodily injury based on the alleged transmission of a communicable disease is almost certainly not covered.

For all the reasons discussed above, it is unlikely a CGL policy will indemnify an insured for liability arising out of a claim based on an alleged transmission of a communicable disease; however, the issue remains whether the carrier would be obligated to provide its insured a defense of such a claim.  Generally, the CGL policy provides the carrier with “the right and duty to defend the insured against any suit seeking…damages [for bodily injury]. However, [the carrier has] no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.”  When it comes to the insurance carrier’s duty to defend, rather than its duty to indemnify, whether coverage is afforded is determined based on the plaintiff’s allegations, as stated in his or her petition or complaint, and the language of the insurance policy.  Effectively, for the purpose of determining whether the insurance carrier has a duty to defend, the plaintiff’s allegations must be taken as true.

In most cases, the plaintiff’s allegations in support of his or her claim of personal injury will fit the definition of “occurrence,” as discussed above.  In addition, the plaintiff’s allegations may very well be crafted by a careful attorney to avoid the “expected or intended injury” exclusion, which is in the standard form of CGL policy.  On the other hand, if a business’s CGL policy contains the exclusionary endorsement for communicable diseases, it is very possible the carrier will deny any duty to indemnify and refuse to provide a defense.

In sum, businesses should consult with their insurance brokers and attempt to obtain a CGL policy that is likely to provide them a defense against claims for personal injury arising out of the alleged transmission of a communicable disease.  Although such claims are far from likely to succeed, they will require a defense and businesses should do what they can to obtain insurance that will pay for it.