Insurance coverage for epidemics and pandemics

The rapid spread of the novel coronavirus transformed from a local epidemic to a global pandemic and to corresponding, sometimes drastic, restrictions on private and business lives. Initially, the tourism and event industries were particularly affected, but in the meantime, there are hardly any companies or entrepreneurs whose profitability is not seriously affected. The restriction or even discontinuation of business activity has already led to financial losses for companies and self-employed, potentially threatening their continued existence from a business perspective. In any case, it is advisable to check whether insurance cover exists for the damages suffered.

There are actual epidemic and pandemic insurance policies on the market. These generally cover - depending on the specific wording - the financial consequences if a competent authority has ordered the closure or restriction of operations to prevent the spread of infectious diseases. This type of cover has been taken out by certain companies in some particularly exposed sectors, such as food processing companies, hospitals or restaurants and hotels.

Other insurance policies may also provide cover depending on the damage suffered. Business interruption insurance generally provides cover for loss of earnings if operations are interrupted as a result of property damage. This is not usually the case if business operations are interrupted as a result of infection protection measures, whether by preventive official order or by closure order of the competent authority after the outbreak of a virus.

Certain insurance policies include business interruptions due to events at suppliers, but regularly accompanied by the aforementioned condition of property damage.

The insurance cover goes farther if extended coverage has been agreed in the business interruption insurance by including an epidemic module or if a so-called all-risk insurance cover has been taken out. Whether business restrictions or closures due to epidemics or pandemics are included depends on the risk description of the insurance contract. If, unlike standard business interruption insurance, property damage is not assumed and if the agreement includes the risk of epidemics/infectious diseases or if an all-risk insurance policy has been agreed, insurance cover may be applicable.

Increasingly, SMEs in particular have extended cover in business interruption insurance to include the risk of the loss of an important key figure, usually the owner. If the latter falls out as a result of an infection, for example with the coronavirus, cover should in principle be available.

The exclusions of cover in the respective policies deserve special attention. These must be clear and unambiguous in order to be valid. General references to force majeure, for example, may not be sufficient to exclude cover in the event of epidemics or pandemics. Exclusions of losses caused by Influenza viruses (H viruses) should not mean the exclusion of losses caused by other viruses such as the coronavirus (SARS-CoV-2). If pandemic damage is excluded, the question arises as to what criteria are used to transform a (local) epidemic into a (global) pandemic. In connection with the coronavirus, the WHO classified the coronavirus epidemic as a pandemic on 11 March 2020.

Cover for employees' claims to continued payment of wages from the employer is provided by daily benefit for sickness insurers, and in the case of employees in hospitals, medical practices and similar daily benefit for accident insurers. If an employee falls ill with an infectious disease such as the coronavirus, their inability to work is covered under the insurance benefits. Similarly, cover should be provided for persons who, although not suffering from an infection, are able to carry out their previous work only at the risk of aggravating their health status. According to the Swiss Federal Office of Public Health (SFOPH), persons at particular risk in connection with the coronavirus are those aged 65 and over and all persons with a pre-existing condition (e.g. high blood pressure, diabetes, cardiovascular diseases, chronic respiratory diseases, cancer and diseases and therapies that weaken the immune system). If these persons are unable or only partially able to carry out their work via home office, they should also be considered as disabled within the appropriate limits. Medical treatment costs are covered by health insurance, and by accident insurance for employees of hospitals and medical practices.

If the business cannot be maintained and employment is threatened, short-time work compensation makes it possible to maintain jobs. The social unemployment insurance (ALV) covers part of the wage costs for employers affected by short-time work for a certain period of time. This is to prevent dismissals as a result of short-term and unavoidable absences from work. Unlike unemployment compensation, benefits are paid to the employer. However, every employee has the right to refuse short-time work compensation. In connection with the coronavirus pandemic, the entitlement to short-time work compensation has been extended and the application process simplified. Persons who work for a limited period of time, temporarily or in employer-like positions, as well as persons who are in an apprenticeship, can now also apply for short-time work compensation.

In order to cushion the economic consequences of the coronavirus pandemic, the Federal Council has decided on various other measures, which are initially limited to six months. Under the new Income Compensation Act (EO), parents with children under the age of twelve who must interrupt their employment because third-party care is no longer guaran-teed can now apply for compensation for loss of earnings. In addition, persons who must interrupt their gainful employment because of a quarantine measure and self-employed persons who suffer loss of earnings due to the closure of a company ordered by federal law or due to the ban on events are also entitled to compensation.

In legal disputes in connection with the consequences of epidemics and pandemics, such as plant closures, delivery failures and the like, it is advantageous to have legal expenses insurance. This can provide pre-litigation advice and bear the costs in any legal proceedings.

Where insurance cover exists, it is important to ensure that the insurance cover is not forfeited as a result of a breach of obligations. There are numerous obligations to notify and cooperate. In any case, the insurer should be notified as soon as possible after the occurrence of an insured event and the necessary information should be provided.

March 2020 | Author: Dr. Lucy Gordon

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