Insurance Law360
November 3, 2014
With cases of Ebola now in the U.S., concerns have been raised as to the safety of public places visited by a person infected with the virus. Despite assurances from health officials that it is nearly impossible to contract Ebola by touching an infected surface such as a door or a handlebar,[1] some business impacts are likely inevitable.
For example, the Ohio bridal shop where Texas nurse Amber Vinson visited remains closed weeks after Vinson’s visit, despite the fact that the shop was extensively cleaned and decontaminated. The bridal shop’s closure is due, in part, to the fact that employees refuse to return to work and customers are concerned that the wedding gown inventory is potentially contaminated. The shop’s owner said their insurance company doesn’t know how to respond to a situation with which it has had no experience, and he doesn’t know if his business will ever again be what it was “in a world where fear is often more persuasive than fact.”[2]
The Texas hospital where both Vinson and Pham were employed has already reported significant financial losses related to the Ebola outbreak.[3] Similarly, although the apartments occupied by both affected Texas nurses have been extensively cleaned and sanitized, the apartment complex owners may no longer be able to rent those apartments due to the stigma of Ebola.
Whether and to what extent first-party property insurance might provide coverage for losses associated with an Ebola outbreak will depend on the specific language of insurance policies currently in place, and whether these businesses can procure coverage for losses resulting from Ebola.
Physical Loss or Damage?
The threshold inquiry for a business affected by Ebola is whether the virus, or the suspicion of its presence, qualifies as physical loss or damage.
A property insurance policy typically provides coverage for “direct physical loss or damage to covered property at the insured premises caused by or resulting from a covered cause of loss.” Although this threshold inquiry is easily satisfied in losses such as fire or water, in instances where the insured's premises has been impacted due to the outbreak of a virus or suspected virus such as Ebola, yet the insured property is unchanged otherwise, a coverage dispute regarding whether a property policy is triggered is likely to arise.
There is no uniform rule as to when a property has sustained “physical loss or damage.” Some courts have found that mere loss of use without physical alteration of the property is not “physical loss or damage.”[4] Other courts have found that the loss of use or inhabitability of insured property, under certain circumstances, can constitute “physical loss or damage.”[5]
Prior to the current Ebola outbreak, the mere fact that an individual affected by a communicable disease has been present in the property would not likely render a property uninhabitable or otherwise unusable. However, given the current hysteria surrounding Ebola, it is not difficult to imagine a scenario where a building would be found uninhabitable in the event of an Ebola outbreak.
Given that there is no bright-line rule as to when a property has sustained “physical loss or damage,” and depending on the jurisdiction and the specific policy language at issue, insureds may make claims to their property insurance carriers relating to the Ebola virus.
Business Interruption and Civil Authority Considerations
Business interruption coverage is intended to protect against economic losses, specifically the loss of...
