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Guideposts to understand if COVID-19 is excluded in construction

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COVID 19 Coronavirus

By Alexandra Berg , Justin Anderson and Jim Dunlap | September 8, 2020

Four guideposts to help assess coverage potential between COVID-19 and Fungi or Bacteria Exclusion endorsements.

Currently, the impact of COVID-19 is being felt unequivocally in the construction insurance marketplace. As such, construction casualty brokers have been tasked with diligently reviewing their casualty placements for indications of whether more favorable language exists in order to not restrict their clients’ claim potential. One relevant and common form found on General Liability policies that is worth noting is the Fungi or Bacteria Exclusion endorsement. Prior to the global pandemic, brokers may not have immediately connected COVID-19 to this exclusion, but it appears there could be some relation.

Some form of this exclusion endorsement is almost universally used by construction insurers to exclude claims of bodily injury, property damage, and personal and advertising injury arising out of mold or bacteria in a building and has been routinely observed for over a decade. To a certain extent, Contractors Pollution Liability (CPL) then conversely became the natural conduit for such coverage. While we would expect fungi/mold and legionella to be included in most CPL policies, bacteria (other than legionella) is not an automatic, nor is “virus”, and in light of the new Communicable Disease exclusions, it is important that you carefully review the CPL policies and endorsements to confirm coverage.

To navigate the relationship between COVID-19 and Fungi or Bacteria Exclusion endorsements found on General Liability policies, we identified the following four key guideposts to assess coverage potential.

1. Is the carrier form utilized ISO CG 21 67 or a proprietary version to the carrier? If proprietary, how does it differ?

In comparing across an array of our large insurer relationships in construction casualty, there are multiple carriers who specifically use the ISO form. Awareness to the differences is critical to understanding where coverage narrows or broadens on carrier-specific forms. There are several themes that underly the differences:

  • Specifically naming “virus” in the exclusion
  • The inclusion of “on or within a building” language
  • The addition of common carve backs

2. Does the form specifically define “virus”?  Would “virus” be considered a bacteria?

ISO CG 21 67 does not explicitly name “virus” in the exclusion, but we would want to leave it to the scientific community to determine what category(ies) of microbial matter COVID-19 might possibly fall under. Some carriers, however, do include “virus” in their exclusion. Therefore, it warrants noting that an overt exclusion of “virus” would certainly be considered an adverse characteristic and would put a fairly hard stop on coverage potential. It is important to closely and individually review the Fungi and Bacteria exclusion to determine its applicability to virus-related claims.

3. Is the presence “on or within a building or structure” the only means excluded, or does the form potentially encompass something broader?

There are several considerations here:

  • Contractors have the unique aspect in that their ongoing operations may not take place on or within a building or structure as many other “brick and mortar” insured operations might. If a contractor focuses on street and road work or if the building/structure has not yet been erected – would the caveat for “on or within a building or structure” even come into focus?
  • If the form aligns with ISO and leaves the presence to “on or within a building or structure”, is it fair to suggest that person to person transmission is still a viable means of an occurrence? Some carriers, however, have a version of the exclusion where it would appear to be the most restrictive in this regard – barring person to person transmission by stating “from any source whatsoever” and further including virus as part of the exclusion.
  • Alternatively, the CPL policy will often limit coverage for fungi and bacteria to “on or within a building or structure”.

4. What carve backs are provided on the ISO form?

  • The only carve back on the CG 21 67 form is for “fungi or bacteria that are, are on, or are contained in, a good or product intended for bodily consumption.” This does not appear to grant any favors in affirming COVID-19 coverage. However, there are markets that appear to be broader in that they provide a giveback for “‘microbes that were transmitted from person to person.” Depending on the interpretation of the definition of “microbes” by the scientific community, this could be an avenue to secure coverage.

While the effects of COVID-19 on General Liability likely won’t fully materialize for years to come, these general considerations can be useful in helping navigate current renewal and claim scenarios for construction organizations. As the industry moves forward in this unprecedented time, new ways of working and handling the impact of COVID-19 are quickly becoming the norm.

Disclaimer

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. COVID-19 is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

Authors

CRIS, Associate Broker – Construction

CRIS, Associate Broker - Construction

North America Construction Broking Leader

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