Anthrax Exposure Raises Cover Questions

Workers' comp coverage applies to: 1) bodily injury, including resulting death, that is caused by an accident, or 2) disease caused by or aggravated by conditions of employment. In the situation the subscriber describes, there is as yet no bodily injury or disease; the testing is for preventive purposes.

That is not to say that preventive testing is not covered. For one thing, state law might require it. For another, insurers might pay the costs of testing as a way of loss control–that is, setting the smaller payment against the larger payment that will certainly be due if anthrax bacteria are found to be present.

An article on page 42 of the Nov. 5 edition of National Underwriter suggests that many insurers are erring on the side of caution and paying for the tests.

A recent release by the Ohio Bureau of Workers' Compensation indicates that states are addressing this issue. Normally, if anthrax was not medically determined, a claim would ultimately be denied. But under the new Ohio policy, employee testing will be covered.

Of course, if the testing determined that the mysterious substance to which the employees were exposed was indeed anthrax, then workers' comp would pay the cost of the antibiotics.

To take this further, suppose the employees alleged mental injury arising out of the potentially hazardous situation. Coverage might vary by jurisdiction. For example, courts in Ill., Miss. and Texas have determined that mental injury caused by mental stress is compensable, while courts in Kan., Wyo., Ohio and Wis. have denied workers' comp based on alleged mental injuries without accompanying physical manifestation.

The employers' liability form would not respond to the preventive testing costs. This coverage applies to bodily injury caused by an accident, or to disease. The insurer pays the sums the insured employer is legally obligated to pay as damages because of bodily injury to employees. If workers' comp does not pay for the costs to test the employees, they may decide to sue the employer.

But again, the coverage responds to actual bodily injury or disease, not to possible exposure to disease. However, if an employee actually contracted the disease and sued the employer for negligence, the employers liability insurer would owe a defense at the very least, because the disease was contracted in the course of employment.

The commercial general liability form would not be a source of recovery for the employees. The CGL form responds to bodily injury or property damage–both defined terms.

Bodily injury is "bodily injury, sickness or diseaseincluding death resulting from any of these at any time." Preventive testing does not fall within the definition. If by some chance preventive testing was held to be within the scope of bodily injury, then certain exclusions come into play.

These same exclusions would also apply if the tests on the substance proved the existence of anthrax. Exclusion d. eliminates coverage for any obligation of the named insured under a workers' comp law. Exclusion e. eliminates coverage for bodily injury to an employee of the insured arising out of and in the course of employment by the insured.

Exclusion e. also applies to third-party "over" suits–for example, if an ill employee sued the container manufacturer, who in turned sued the employer for negligence in training employees in the correct process of opening containers.

There would be no coverage under coverage C medical payments. Exclusion 2.a. eliminates coverage for expenses for bodily injury to any insured.

However, if a visitor were on the premises when the employees opened the container, and there was alleged bodily injury resulting from employee negligence in opening the container, the CGL would at the very least owe a defense.

Although some might argue that the spores are contaminants, and therefore liability coverage is limited, this is not the case. Anthrax spores do not fill the scope of the definition of pollutants–smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Anthrax is caused by a spore-forming bacterium, bacillus anthracis, which would appear to take it out of the pollutant category and place it squarely in the animal category.

The sterilization method used in Washington–chlorine dioxide gas–also gets rid of rats, mice and roaches, so clearly the organism is not an industrial byproduct, as are the other items in the definition.

Finally, some health insurers have announced they will cover the costs of testing for possible exposure to anthrax. Not all employees have health insurance benefits, however.

The question arises as to whether there is coverage under commercial property forms for cleanup. Coverage is triggered by direct physical damage resulting from a covered cause of loss. The presence of an unknown white powder on the building's surface, even though the substance must be cleaned up, does not appear to fall into that category. It would be as if flour landed on carpeting and could easily be vacuumed without harm to the carpet. No damage has been done to the carpeting.

If we could view the spores as pollutants, the commercial property form (ISO CP 00 10) provides some coverage for cleanup, but only to extract pollutants from land or water if caused by a covered cause of loss. The special causes of loss form would respond to cleanup of the spores from land.

However, as we discussed earlier, the spores do not meet the definition of pollutants. The spores are an animal life form. The commercial property forms exclude loss caused by or resulting from infestation of animals.

There is no business income coverage for the time the business is closed. Standard business income coverage, such as that on Insurance Services Office forms, is triggered by direct physical loss of, or damage to property, including personal property, at the described premises. If the powder from the container does no damage to covered property then there is no trigger.

We should also consider action of civil authority as a possible trigger. The insured premises was closed while specialists removed samples for testing. Here again, the standard coverage responds to the actions of the civil authorities prohibiting access to covered premises because of direct physical loss to property other than at the described premises.

So, for example, businesses with business income coverage located near the World Trade Center could call upon this additional coverage because there was covered direct physical damage and civil authority prohibited access to the area. (Policy wording varies and forms must be carefully checked when making coverage determinations.) But absent direct physical damage, as in the powder scenario, there is no business income coverage.

If the white powder was vandalism–a hoax, perhaps–the resulting cleanup and loss of business income would be covered. However, "Webster's Collegiate Dictionary (Tenth Edition)" defines vandalism as "willful or malicious destruction or defacement of public or private property." The property in question was not destroyed, but was it defaced?

To deface is (Webster's again) "1: to mar the external appearance of; injure by effacing significant details… 2: impair." Mar and efface have as synonyms destroy, which suggests that defacement has a permanent nature. That is not the case with something so easily cleaned up.

Here again, therefore, there is no coverage.

Diane Richardson, CPCU, is associate editor of the FC&S Bulletins, published by the National Underwriter Company in Erlanger, Ky. The editors welcome comment and questions and may be reached by fax at 859-692-2237 or via e-mail at FCS@NUCO.COM.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 26, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Contact Webmaster