Canadian Underwriter

Could a homeowner’s policy trigger liability coverage for COVID-19?

April 20, 2020   by Jason Contant

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A homeowner’s insurance policy will not likely be called upon to respond to a liability claim arising from the transmission of COVID-19, an insurance litigation lawyer said Friday.

As such, brokers likely don’t need to take the initiative to advise insureds about exclusions in personal lines policies, Chris Blom, a partner with Miller Thomson LLP in Toronto, told Canadian Underwriter.

Blom said he is not aware of any circumstances in which homeowner policy exclusions have come into play during the current pandemic, “although it is a bit early to get a sense of whether there will be any liability claims.” Of course, brokers will advise insureds about certain aspects of liability if, as, and when claims arise.

Canadian Underwriter asked Blom about bodily injury and communicable disease exclusions in personal lines policies, hypothetical scenarios in which such a claim might be made, and any circumstances in which exclusions have come into play. He was also asked if brokers should be advising clients regarding personal lines policies and pandemic.

To understand liability coverage and exclusions in a homeowners’ policy, it’s important to look at the policy wording, Blom offered. Liability coverage in a typical policy of homeowners’ insurance reads as follows:

We will pay all sums which you become legally obligated to pay as compensatory damages because of unintentional bodily injury or property damage arising out of:

  1. Your personal actions anywhere in the world
  2. Your ownership, use or occupancy of the premises defined in Section II.

The premises of the insured will typically be their home, Blom said.

The policy carries exclusions as well, for:

  • Bodily injury to you or any person residing in your household other than a residence employee
  • bodily injury or property damage caused by any intentional or criminal act or failure to act by:
  1. Any person insured by this policy; or
  2. Any other person at the direction of any person insured by this policy
  • the transmission of any communicable or sexually transmitted disease, including Acquired Immune Deficiency Syndrome, by any person insured by this policy.

The disease caused by the new coronavirus, named COVID-19, is a “communicable…disease.”

Consider the following scenario: an insured owns a home and hires a housekeeper to come into the home once a week to clean it. The insured and his family become infected with coronavirus and are diagnosed with COVID-19.

The insured urges the housekeeper to continue to work at the home, despite warnings at all levels of government to remain home and socially distance. The housekeeper also becomes infected and is diagnosed with COVID-19, and dies as a result.

If the insured’s family members make a claim against the insured on the theory that he infected them, the policy will not respond, since the family members are persons residing in the household, Blom said.

But the claim on behalf of the family of the housekeeper is not excluded at this level of the policy, because she was a residence employee.

That said, whether the transmission was intentional or unintentional also comes into play, Blom noted. And “most importantly, whether the transmission was unintentional or intentional, the exclusion for communicable disease will apply, such that the insurer will not respond to claims.”

Let’s extend the scenario further. Say the insured maintains that any infection was passed unintentionally. But the spouse of the housekeeper has evidence to suggest that the insured intentionally breathed on the housekeeper in an effort to infect her, and the spouse considers a claim for damages against the insured.

“The claim will fall within the grant of coverage noted above, if the infection was passed unintentionally,” Blom said. “If it was passed intentionally, it will not fall within the grant of coverage.”

The exclusion for persons residing in the household will not apply as the housekeeper was a residence employee, Blom said. If the transmission was unintentional, the exclusion for intentional acts will not apply; if it was intentional, then the exclusion will apply.

One of the problems in any such claim will be in proving that the disease was transmitted by a particular individual.

Various issues can arise in determining whether an insurer is required to defend a claim of this nature, in which it is in doubt whether the alleged conduct is unintentional or intentional. The duty to defend the claim is separate from the obligation to indemnify the insured if the claim is successful.

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