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Environmental insurance coverage for COVID-19: Know your policy

Rådgivning om selskapsrisiko|Forsikringsrådgivning og teknologi
COVID 19 Coronavirus

By Brian McBride | March 20, 2020

Environmental insurance tends to vary widely by industry, so it’s important to review environmental policies closely and not assume coverage for COVID-19 is included.

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About our COVID-19 coverage

In our ongoing coverage of the COVID-19 outbreak, experts from across Willis Towers Watson share insight into what you need to know to manage your business and employees and reduce your risk.

As concerns about the business and broader economic impact of COVID-19 continue to grow, further questions arise about the applicability of certain lines of coverage. We’ve covered how several different types of insurance might cover COVID-19 and provided a deeper analysis of how workers compensation might apply. Here I review another type of coverage that could pay for COVID-19 losses: environmental insurance.

Evolution of coverage for bacteria and viruses under environmental insurance policies

To understand current environmental insurance coverage better, it’s helpful to look back at how the industry developed certain lines over time in response to specific occurrences.

In the early to mid-2000s, site pollution coverage for the presence of mold and legionella became readily available in the environmental insurance marketplace. When offered, the site pollution policies provided coverage for third-party bodily injury and property damage claims as well as first-party cleanup costs arising from the presence of mold or legionella at a covered location. Carriers referred to these exposures as “indoor air quality.” But they didn’t affirm coverage for bacteria or viruses.

By the late 2000s, as the environmental insurance marketplace expanded, carriers began developing specific product lines geared toward certain industries. During this time, we began to see site pollution coverage tailored specifically for hospitals, clinics and managed care facilities. It was within health care pollution forms and endorsements where we first saw the definition of “pollution condition” broadened to include bacteria and viruses. In addition, coverage was expanded to include cleanup costs as required by the Centers for Disease Control (CDC), and coverage for disinfection and infectious wastes were introduced to site pollution and contractor’s pollution liability products.

Current environmental insurance marketplace and considerations for COVID-19 coverage

Over the past decade, claims relating to indoor air quality have risen dramatically in both number and severity. And while pollution coverage is still available for bacteria and viruses, it is limited to certain scenarios and only addresses cleanup and disinfection costs. If coverage is provided for bacteria and viruses (and there is no specific exclusion addressing COVID-19), carriers limit the scope of coverage as follows:

  • Insured property. Sites owned by the “first named insured” to which the purchased coverage applies. No coverage exists for a pollution condition (including a potential release of a virus or bacteria) that occurs at a facility that is not an insured property.
  • Definition of pollution condition. Several carriers will include bacteria and viruses as a pollution condition, but solely in terms of cleanup or disinfection costs. For those carriers, therefore, there is no affirmative coverage for bodily injury, property damage or business interruption. There are a few carriers that include bacteria and viruses within the definition of pollution condition, without narrowing the scope of coverage.
  • Separate insuring agreement. A “disinfection event” has its own single-event scenario insuring agreement (usually limited to cleanup only) and exclusions (most restrictive).
  • Environmental laws. Typically, environmental policies provide cleanup costs to the extent required by environmental laws, although some may also include coverage for remediation performed by the directive or order of an administrative agency (e.g., per the direction of the CDC or a health department) in absence of environmental laws. Since there are no actual environmental laws governing the remediation standards of COVID-19 – coverage would only apply if the latter provision is included.
  • Disinfection event. Typically, a separate insuring agreement (or defined separately from a pollution condition) provides cleanup costs only arising from “facility-borne illnesses/health care associated infections” only. Coverage may be further restricted by time-element provisions, or by other exclusions such as communicable disease/human-to-human contact/bodily fluids exclusions. Some disinfection event exclusions even specifically restrict costs associated with the disposal of corpses or body parts.
  • Facility-borne illness/Health care associated infections. Usually relates to the method by which an illness or infection may be covered (i.e., contracted directly from viral or bacterial contact at a facility and not directly from another human).
  • Communicable disease/Human-to-human contact/Bodily fluids exclusion. Usually relates to the method or media by which an illness or infection is excluded. Can be applied to all insuring agreements or specifically to disinfection events coverage.

Different coverage for different industries

So how may this affect your business? The coverage provided by each policy is unique and must be evaluated individually on a case-by-case basis.

For example, for site pollution policies, if coverage is provided for COVID-19, it will likely be for cleanup costs associated with a disinfection event arising from a facility-borne illness; however, a few carriers may provide broader coverage. Separately, there may be coverage for COVID-19 via a pollution condition associated with medical waste (which may offer a separate avenue for bodily injury). With that said, attention must be given to exclusions, including communicable disease, human-to-human contact and bodily fluids, that may be applied broadly to further restrict or eliminate coverage.

For those with pollution liability coverage, many of the policies are silent with specific regard to viruses and bacteria – although they may mention microbial matter with respect to mold and legionella. Environmental carriers may not have contemplated the potential for virus or bacteria-related pollution condition resulting from covered operations. Therefore, each carrier’s coverage form would need to be evaluated to determine how potential coverage for viruses or bacteria may exist.

In order to be ensure your policy will provide the coverage you may need if COVID-19 impacts your organization, a careful look at your environmental policy is essential. Be diligent with your evaluation, address each possible limitation and make no assumptions when analyzing potential coverage for this virus.

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates.

The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates.

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage.

Author

Environmental Broking Leader

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