VIRUS EXCLUSIONS
Unintended Consequences For
Pandemic Virus Exclusions
Virus exclusions have become a major obstacle in the insurance industry following the events of the pandemic . Although already a frequently-seen component of property insurance policies , we are now seeing these exclusions mandated across most , if not all , liability policies .
Naturally , insurance carriers are not designed to handle a global health pandemic , so the nature of the inclusion is not a surprise for us . However , in addition to leaving our clients bare for any claims related to the pandemic fallout , we are further concerned by the adverse effects these exclusions are having due to the ambiguous wording they contain .
A prevalent virus exclusion on general liability policies is for communicable disease . In an attempt to shut out coverage for the effects of the pandemic , the exclusion fails to define communicable disease to a scope that the insurer couldn ’ t be expected to take on . A dictionary definition would exclude viruses and a host of other infectious agents , such as foodborne illnesses , from coverage under the policy . For our clients in the food industry , this undermines the very reason they come to purchase liability insurance in the first place .
This issue is not unique to Hawaii . The mandate of this exclusion likely has been brought on by the global reinsurance industry ( companies that insure insurance carriers to spread the risk of catastrophic claims such as natural disasters ). Unfortunately , because this new standard is being executed at such a high level , it has been difficult to find viable alternatives for our clients when it comes time to renew . These same reinsurers work with many different insurers , worldwide . Indeed , we have checked with many food industry programs across the country , as well as insurers in London , only to hear that they too are utilizing the broad exclusion .
For our clients in the food industry , we have spent hours negotiating revised language that reinstates coverage for foodborne illnesses . The increase in premiums for this coverage , however , has been prohibitive . At this point , it is often a decision between investing heavily in peace of mind or accepting the communicable disease exclusion and relying on downstream suppliers and distributors to bear the brunt of foodborne illness claims . But what happens if their policies have the exclusion as well ?
Fortunately , things are changing every day . We have seen a couple insurers willing to clarify their language to help our clients avoid the additional costs . When you go to renew your policy this year , make sure to review the wording of any virus exclusions very carefully . Virus exclusions are not all the same , and the precise wording of each will be assessed on an individual basis should your claim go to court . This means it ’ s important to understand how each exclusion could be interpreted and applied to your situation . Your Atlas Insurance advisor will always provide you with a copy of any exclusions under your policy prior to signing , so you will have time to review the language with a legal professional to determine what it means for you .
If you have any questions about your upcoming liability policy renewal and how it will be impacted by virus exclusions , we invite you to reach out to us for more information . +
BY : RUSSELL PARK , SENIOR VICE PRESIDENT - LARGE COMMERCIAL , ATLAS INSURANCE
Russell Park is senior vice president and Sales Leader of Atlas ’ commercial sales unit . With over 30 years of experience in the insurance industry locally and in California , Russell ’ s expertise includes helping clients evaluate and manage the optimal combination of risk retention and risk transfer while considering the economic , market and contractual impact . In addition , he provides extensive insurance policy reviews to identify and resolve coverage gaps that can lead to significant client losses .
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