Last Wednesday, the World Health Organization (WHO) declared COVID-19 – commonly known as the coronavirus – a "pandemic," the first such declaration since the H1N1 flu pandemic in 2009. More dominoes have fallen since, as the world scrambles to contain its spread and grapple with the economic ramifications. The stock market suffered its worst loss since the 1987 crash on Thursday, as the Dow plunged 10%. The sports world ground to a halt as all major leagues suspended their seasons and cancelled tournaments. Governors in 30 states have now declared state emergencies, and some have banned gatherings of more than 250 people for an indefinite period of time. Yesterday, the CDC recommended against any gathering of 50 or more people anywhere in the United States for the next 8 weeks. Domestically and internationally, corporations and trade associations are following suit, as many have cancelled conventions, conferences, and other large events that had been scheduled for the coming months.
Among all this uncertainty and rapid economic contraction, those in many fields are wondering: Are the costs of (and losses resulting from) cancelling our conference covered by insurance? Does COVID-19's designation as a "pandemic," or do "state of emergency" declarations in many jurisdictions, affect the scope of our insurance coverage?
The answers to these questions will all depend on the terms of your policy. Those seeking to recoup the costs of cancelling a convention or conference should look first to their event cancellation insurance policy, if they have one, as it is most likely to provide such coverage. However, many of these policies exclude coverage for uncommon and catastrophic events. For example, virtually all such policies have coverage exclusions for losses that are caused by acts of war, and some may also exclude terrorist attacks. Many event cancellation policies also exclude coverage for natural disasters and, most pertinent here, communicable diseases. Often the key questions for coverage are: Does the communicable disease exclusion apply? If so, did the policy holder pay extra to purchase a coverage "extension" that will cover losses from communicable diseases, even if their base coverage will not?
In this regard, WHO's "pandemic" designation is particularly important. Many event cancellation policies use WHO's declaration as a trigger for their communicable disease exclusion. Some policies contain language similar to the following:
This insurance does not cover loss arising directly or indirectly as a result of any communicable disease or the threat or fear of communicable disease (whether actual or perceived).
This exclusion shall not apply unless prior to or simultaneously with the loss arising, the communicable disease is declared an epidemic or pandemic by the World Health Organization (WHO) or by Federal or Local Government Agency. However, any threat or fear of communicable disease, whether actual or perceived, is excluded.
Unfortunately, those with similar language in their policies may have a weaker claim for coverage today than they did a week ago, prior to WHO's announcement that it officially considers COVID-19 a pandemic.
The coronavirus outbreak has placed a tremendous amount of pressure on insurers, who now face many large claims at once. As a result, insurers may take an aggressive negotiating posture for those claims that are not clearly covered under the terms of their policies. In this context, it is particularly important for clients to be informed about their options and their best arguments for coverage. Venable's insurance team is available to advise on coverage and to guide clients through the claims process.