SARS Excluded From Event Policies Exclusions for damages caused by Severe Acute Respiratory Syndrome are now common in event cancellation polcies, but have yet to be seen in other lines of coverage, according to insurance brokers and consultants.
Scott Brady, a director for Aon Corp. in New York, said that all insurers writing event cancellation coverage for his clients are excluding SARS.
"Event cancellation is a 'force majeure' type of policy, which means anything beyond the control of the owners or promoters of the event would normally be covered," Mr. Brady explained. So the only way to avoid SARS-related claims would be to specifically exclude them, he noted.
Mr. Brady was quick to point out, however, that the nature of event cancellation coverage is to write the policies well in advance of the event, so there are already many policies out there that do not exclude SARS. "Policies are generally written up to 12 months in advance, and the underwriters can't do anything about those."
As an example of how SARS can affect an event, Mr. Brady gave an example of a convention at which attendance is expected to be 20,000, but only 2,000 show up due to fear of contracting SARS. He mentioned a buying show in China that is "open but empty," a victim of SARS-related fears, as well as a cancer society gathering that had to be cancelled.
So far, SARS exclusions have not crept into other types of policies, said consultant Bryan Tilden of Pittsboro, N.C.-based Tilden and Associates.
From a liability standpoint, SARS "doesn't meet the definition of 'accident,'" he said. "It would be like people blaming you because they caught the flu or a virus. It just doesn't come within the four corners of the policy." So SARS exclusions will not become an industry trend in liability policies because there is no coverage to begin with, he said.
As for workers' compensation, Mr. Tilden said issues would revolve around whether SARS "arose out of the employment," such as during a business trip, in which event it may be covered.
But would SARS qualify as a covered "occupational disease" under workers' comp? Mr. Tilden doesn't think so, as it is not characteristic of any particular type of employment.
Aon's Mr. Brady, on the other hand, thinks that exclusions may eventually make their way into other types of policies. "Since 9/11, underwriters have been extremely sensitive to 'aggregation-type risks,' where you can have massive losses from a single cause," he said. "So I can't imagine that it's not an issue for them."
As for business interruption, Mr. Brady noted that there would generally be no coverage, as there would be no physical damage to trigger the loss. "The only way there would be a covered business interruption loss is if a civil authority restricted access to the insured's premises," he said. He did not know of any insurers that are endorsing policies to cover SARS-related business interruption for losses other than those relating to civil authority.
Reproduced from National Underwriter Edition, April 21, 2003. Copyright 2003 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.
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