Commercial General Liability Policies in the Face of Covid-19
Most agree that Covid-19 will continue to wreak havoc even after the stay-at-home orders are lifted, especially when it comes to questions of liability. Third-party tort lawsuits claiming that an individual was infected with Covid-19 on a business’s premises are likely to be prevalent. Health care and transportation providers as well as hospitality services and retail establishments may be particularly vulnerable. Individuals or estate representatives may commence lawsuits claiming that they are owed compensation because they were seriously injured or their family member died after contracting Covid-19 on a business’s property. Business owners need to consider whether they have coverage pursuant to their Commercial General Liability (CGL) insurance policy. Right now, without any exemplary case law, there is uncertainty as to whether CGL policies will provide a defense and coverage in impending Covid-19 lawsuits. As with any insurance coverage question, the policy language will be determinative.
CGLs usually are standard form insurance policies. The Insurance Services Office’s form CGL policy provides businesses with protection with respect to claims brought by third parties for: (a) “bodily injury” or “property damage” (Coverage A); personal and advertising injury (Coverage B); and medical payments (Coverage C). “Bodily injury” is defined as “injury, sickness, or disease sustained by a person, including death.”
First, for there to be coverage, the alleged “bodily injury” must have occurred during the applicable policy period.
Next, CGLs apply if the “bodily injury” is caused by an “occurrence.” An “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
Assuming the contraction of Covid-19 occurred during the policy period and qualifies as a “bodily injury” caused by an “occurrence,” the next step is to analyze whether any of the policy exclusions apply. The two exclusions that are most likely to apply to Covid-19 are:
- Communicable disease exclusions – The communicable disease exclusion is rarely seen in CGL policies. But in Koegler v. Liberty Mutual Insurance Company, 623 F. Supp. 2d 481 (S.D.N.Y. 2009), the court held that no liability coverage was owed to an individual for claims that he transmitted the human papillomavirus and herpes virus to his girlfriend and her daughter. The court held that the communicable disease exclusion, which excluded coverage for bodily injuries arising out of the “transmission of a communicable disease, virus, or syndrome,” precluded coverage. But the Communicable Disease exclusion is not seen often in CGL policies.
- Organic pathogen/fungi/mold/mildew/yeast/microbe exclusions – While these exclusions are often generally classified as “mold” exclusions, they can be defined more broadly. For example, a policy exclusion for organic pathogens may define organic pathogens as any bacteria, virus, fungus, mold, mushroom, yeast, mildew, mycotoxin or other metabolic products or their spores, scent, vapor or gas or byproducts, or any reproductive body they produce.
Even if coverage may be disclaimed, the insurer’s duty to defend a lawsuit is almost always broader than its duty to provide coverage. In other words, insurers are likely to have a duty to defend, and are required to meet that obligation if there is even a possibility of coverage for the underlying liability.
In the face of Covid-19 and all of the challenges it will present to businesses in their reopening, one of the many items that a business needs to review is its commercial general liability policy. Legislation is being considered that would shield companies from liability for Covid-19 related claims provided that the business followed federal and state guidelines in its reopening. Whether such legislation is implemented or not, to avoid these types of claims and lawsuits, businesses should adhere to all Centers for Disease Control guidelines, ensure that any individual who has or may have Covid-19 does not present for work, and screen and refuse entry of customers or clients who have or may have Covid-19, among other essential practices to maintain safety in reopening.