Does Commercial Liability Insurance Cover Claims Arising Out of COVID-19 Exposure?

As our collective understanding of COVID-19’s national (and global) impact continues to develop, many business owners may wonder whether their commercial general liability (CGL) policies can provide coverage against any claims associated with COVID-19, or any other infectious disease.

CGL policies may be implicated in the COVID-19 outbreak if customers are infected and allege they were infected on the business’s property. Regardless of whether any individuals asserting such a claim would be successful in court, a defendant business could nevertheless incur significant costs associated with defending against the claim and be exposed to potential judgments entered against them. So, will a CGL insurer step in and defend and indemnify an insured who faces such a claim? Like many legal questions, the answer is “it depends”.

Businesses carry CGL insurance policies for coverage associated with sums that they become legally obligated to pay as a result of bodily injury or property damage that is caused by an “occurrence”. Most CGL policies define “bodily injury” to include “sickness or disease sustained by a person, including death resulting from any of these at any time”. Certainly it would seem that someone contracting COVID-19 would qualify as a “bodily injury” for the purposes of CGL policies. Is exposure to COVID-19 an “occurrence”?

Most often, CGL policies define “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”. If a consumer alleges that he or she was exposed to the virus and subsequently suffered bodily injury due to the virus at at an insured’s place of business – for instance, from a shared or circulating HVAC system – or due to the insured’s presence  – for example, a construction project – that could be enough to trigger coverage. Whether or not an insured’s failure to prevent exposure to COVID-19 is an “occurrence” under a CGL policy will most likely turn on whether the insured foresaw the injury. Due to all the recent news coverage and recent warnings, instructions, and restrictions issued by the governments and international agencies regarding the urgent need to contain the disease, a customer or other third party contracting COVID-19 could be regarded as a foreseeable event to be expected by an insured. CGL coverage does not apply to expected harm.

Even assuming that contracting COVID-19 is an “occurrence” under a CGL policy, an insured business could still be left without coverage against those claims depending on what exclusions are part of their policy. For instance, some CGL policies include infectious disease exclusions, which expressly preclude coverage against any claims arising from the “transmission of a communicable disease, virus, or syndrome”.

Some coverage professionals have speculated that COVID-19 related claims could also be precluded by a policy’s pollution exclusion. Pollution exclusions cancel coverage against any harms arising out of the discharge, dispersal, or migration of ‘pollutants’”. “Pollutants” are defined in CGL policies as any “solid, liquid, gaseous or thermal irritant or contaminant” such as vapor, soot, fumes, and acids. Viruses are microscopic infective agents that can reproduce and evolve through natural selection. Due to these characteristics, classifying a virus as a “pollutant” could be a stretch – but an insurance carrier could potentially take that position and argue that it does not owe coverage.

Before a business can fully consider whether their CGL policy would provide coverage for COVID-19 exposure, that business must first understand the terms, conditions, and exclusions to their CGL policies. In many cases, a business and its CGL carrier will not agree as to whether the insured is entitled to coverage. Antheil Maslow & MacMinn, LLP is highly experienced in navigating CGL coverage disputes, analyzing the terms and exclusions of CGL policies, and – when necessary – litigating declaratory judgment actions to determine whether insurance applies.

All business owners are encouraged to review their commercial general liability insurance policies to understand their potential exposure and seek appropriate legal advice where necessary.