Covid-19 and General Liability Insurance

Everyone is feeling the effects of the COVID-19 pandemic and responding in different ways. Businesses across South Africa are rapidly implementing policies to comply with government regulations in an attempt to minimize the spread of the virus. Countless uncertainties arise for the insurance industry, and brokers and insurers are already inundated with questions about policy coverage. The time has come to look beyond the chaos and consider the potential liability risks which the novel virus carries and to take steps to guard against such risks by ensuring that adequate cover is in place.  

Following the outbreak of the virus and the strict lockdown measures in place, the focus of the insurance industry thus far has been on whether the resultant business closures and lost sales are covered under business interruption policies. Everyone has been debating whether the virus satisfies the general requirement for physical damage, whether the infectious disease exclusion will apply and in what respects coverage could otherwise be limited. However, very few people are considering what impact the virus could have for business owners from a liability perspective in the future.

Although the full effect of the virus is yet to be experienced, one can already predict what liability risks will be faced by policyholders in the time to come. The most obvious risk is failing to protect others from exposure to the infection. Companies in certain high-risk sectors should be particularly attentive, which includes the retail, healthcare and transportation sectors. Whilst a potential claimant is expected to find it difficult to prove that he or she contracted the virus from any particular location or premises, the position will ultimately be informed by the facts of each case and business owners should remain vigilant in implementing safety measures in order to present a viable defence in the event of legal action.  

The question may be asked as to what the potential quantum of Covid-related claims would be. The heads of damages which a plaintiff could claim under would probably include past and future medical expenses incurred in treating the virus and any resultant medical issues. If a plaintiff can prove that the virus has affected his or her earning capacity (in the short or long term), a claim for loss of past and future earnings can also be anticipated. In the unfortunate event of someone succumbing to the disease, policyholders should be mindful that wrongful and negligent conduct leading to the death of a breadwinner would give rise to a loss of support claim on the part of the surviving spouse. Although the amount of such a claim would ultimately depend on the historic earnings of the deceased breadwinner, these claims may run into millions of rands.  

When considering a delictual claim, a potential hazard which could cause bodily injuries may be preventable, but this does not mean to say that a particular person or business owner necessarily has the duty to prevent it. That would depend on the antecedent question of wrongfulness which, put broadly in the context of an omission, involves the question as to “am I my brother’s keeper”? This question is answered by reference to the convictions (or “boni mores”) of the community. Under the new Covid regulations, business owners have a duty to create a safe working environment, and this statutory obligation could shape the convictions of the community and give rise to a legal duty on the part of a business owner to take similar steps to protect anybody reasonably expected to be on the premises.

In addition to proving that a legal duty exists, a claimant would also need to prove negligence. The recognised test for negligence rests primarily on two legs, being reasonable foreseeability and reasonable preventability of damage. Given the widespread media coverage of the novel virus, and taking into account the contagion rate which makes the virus hard to control, we expect that claimants may be able to prove that contracting the virus from a business premises was reasonably foreseeable by the property owner, depending of course on the particular circumstances. However, proving that the virus was reasonably preventable, and that the virus was actually contracted from (and therefore caused by) the property owner, is not straightforward by any means.

Scientific research indicates that the virus can be transmitted in a number of ways, including both surface and airborne transmission. The virus also affects different people in different ways, and most people develop moderate or no symptoms, which sometimes makes the virus impossible to trace through the suggested screening process that certain businesses are now required to adopt.  In these circumstances proving a causal connection between the harm sustained by the plaintiff and the particular location where the virus was supposedly contracted from will be a major challenge for the plaintiff. Even if this hurdle is surpassed, a further challenge lies in proving that the spread of the virus was preventable by the business owner.

A general liability policy usually covers a policyholder for “injury” or “damage.” Although it remains to be seen exactly how the virus will be classified in insurance parlance (and whether any general or specific exclusions could apply to such claims) businesses should nevertheless ensure that they have adequate commercial general liability policies in place to cater for potential Covid-related claims. The fact that a claim could be difficult to prove from a legal point of view is neither here nor there, because no matter how speculative the litigation may be, a business owner would still require proper legal representation which is ensured by satisfactory liability cover.

Policyholders also need to be mindful that most liability policies require them to take reasonable precautions to prevent claims. Accordingly, policyholders should adopt measures to comply with government regulations relating to their particular industry in an attempt to minimize the spread of the virus.