Businesses and their insurers will be monitoring the Coronavirus outbreak with increasing concern. As the Chinese government switches to crisis mode and the UK government warns that the country is unlikely to escape a "rapidly developing" global outbreak, what are the risks for industry and their insurers?Experience of previous outbreaks of new diseases show that even isolated events can trigger litigation, insurance claims and coverage disputes.
The healthcare sector and employers
Insurers that provide coverage to the healthcare sector may be particularly exposed to litigation. Healthcare workers in China have contracted the disease after treating patients. This serves as a warning that healthcare workers in the UK may contract the disease if an outbreak of the virus occurs in the UK.
Fast moving circumstances, where the authorities lack full understanding of a disease, increase the risks of litigation. If there are claims, the claimant population could include members of the public, patients and hospital employees. Where a member of the public visiting a hospital, or a nurse treating a patient, is infected, claimant lawyers may see opportunities to bring claims against hospitals, doctors and health agencies. Any number of parties could be targeted by claimants, for example: government agencies if they do not implement Coronavirus-specific protocols, hospitals if they do not train staff to respond to a Coronavirus case or individual doctors who do not spot symptoms.
If there is litigation, insurers may find that it is difficult to resolve due to the unique challenges presented by the Coronavirus. A hospital has a duty of care to protect its staff, patients it treats, and potentially, members of the public who visit the hospital. A claim against a hospital or doctor will hinge upon determining whether the defendant was in breach of that duty of care. However, determining the standard of care could prove difficult as healthcare agencies across the world continually update their protocols for dealing with the disease. In the initial stages, the standards healthcare agencies must adhere to are not clear-cut. Extraordinary circumstances would make determining whether defendants were in breach of their duty of care difficult to resolve.
It is not just employers of hospital staff that could be exposed. Employers could potentially be liable if they send an employee to an area where the risk of contracting the Coronavirus is high. Both the employee, and any other members of the company who are infected by the employee, may seek to bring claims against the company.
Insurers of healthcare agencies, doctors and hospitals, as well as businesses operating in areas of high risk, should be asking their insureds what plans they have in place to limit their exposure to potential litigation.
It is not just hospitals that could face litigation in the event of an outbreak. If protective equipment fails, leading to cases of infection, hospital staff and members of the public could bring claims against manufacturers if the equipment was poorly designed or the manuals accompanying the equipment were not fit for purpose. But hospitals would not escape liability if protective equipment failed because they did not provide adequate training to their staff. Litigation where equipment fails is, therefore, likely to focus on the chain of causation to pinpoint where failures occurred and who was to blame.
Insurers of manufacturers and suppliers of protective equipment should ask their insureds to stress-test the guidance and disclaimers that accompany the equipment. These documents need to be updated to ensure that they are easy to understand, track the current state of knowledge on the ways the Coronavirus can be transmitted and guarded against, and clearly spell out how the equipment is to be used.
Perhaps the biggest threat to the insurance market could be the sheer scale of the risk. The Coronavirus' relatively lengthy incubation period of 10 to 14 days allows infected individuals to travel around the world, unknowingly spreading the disease whilst appearing to be healthy.
Supply chains are ever more complicated and the world's population is increasingly mobile. The Corona virus has the potential to affect large populations, multiple industries and many countries at the same time.
A serious global outbreak, could, therefore, expose insurers to claims concerning medical products or clinical staff in multiple jurisdictions. Some guidance on handling litigation on multiple fronts is provided by the medical products litigation of recent years, such as over cosmetic implants, orthopaedic devices and pharmaceutical products. Those claims gave insurers experience of defending multi-claimant, multi-jurisdiction litigation, dealing with complex clinical and regulatory issues. Insurers would want to assemble legal teams to take a joined-up approach towards resolving disputes around the world, possibly in circumstances where governments and regulators are behind the curve.
It appears that supply chains of companies in regions linked to China will be particularly affected. Insurers should be prepared to handle enquiries to endorse policies with extensions for infectious diseases.
Businesses with a high volume of customer flow through their premises, such as restaurants, hotels, shopping centres, gyms, airports, and hospitals could be particularly affected by any outbreak of the Coronavirus in a particular jurisdiction.
Typical business interruption policies are triggered by property damage, meaning that coverage is unlikely to be available if interruption is caused by the Coronavirus. However, the business interruption threat can be met by including ‘notifiable disease’ extensions in policies, which can be triggered by government orders (including to close business premises).
There has been much comment on the parallels between the Coronavirus outbreak and the SARS outbreak of 2003. The coverage disputes that arose following the SARS outbreak in 2003 show that clarity in policy drafting is crucial. Disputes concerned whether SARS was a "notifiable" disease, at what point the disease became “notifiable” and whether coverage was available where governments established mandatory, as opposed to voluntary, regimes to cope with the disease.
Insurers may wish to consider tightening up their policy wordings to limit the prospects of coverage disputes, as well as exploring the market’s appetite for coverage specifically focused on the risks posed by infectious diseases.