Read the full article published 11 September 2020 in Insurance Business magazine.
As a result of the current pandemic event and an omission by some insurers to update their pandemic exclusions, human infectious disease clauses for Business Interruption (BI) policies will come under close scrutiny by the courts.
The BI policy normally covers only those premises owned or occupied by the insured listed in the policy individually or collectively. Traditional BI policies typically require physical loss or damage to such property to exist before a claim can be made. Over the years, however, cover has been extended to various perils which do not involve physical damage, such as (among other things) infectious or contagious disease.
The SARS virus was a wakeup call. It highlighted that, in the case of a pandemic, there is potential for significantly many, and perhaps even all BI policies, claiming simultaneously. You could also see multiple claims from the same policy if there are several waves of pandemic over the year of cover.
The anxiety felt following SARS, avian influenza and swine flu, and the anticipated proliferation of pandemic losses, meant that pandemic exclusions were applied from 2006 to all businesses, not just those most at risk.
More generally, in the context of infectious or contagious disease and its bearing on reinsurance recoveries, the real problem relates to determining the date of loss and defining a loss occurrence.