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Are businesses at risk of public liability for COVID-19 infection claims?

Published 20 January 2022

As businesses to manage changes with COVID-19 health risks and restrictions they also face the risk of transmission in their commercial premises – to employees, customers, visitors and the general public. Here we unpack the extent to which businesses are and are not covered by their property or public liability insurance for COVID-19 infection. 

Public liability and property insurance policies refer to ‘communicable disease’ liability. COVID-19 is a communicable disease by nature of transmission, and this is how the insurance implications are considered in this information.


What insurance cover does not apply to claims of COVID infection?

There are some common business insurances that may be perceived as providing some type of cover for COVID-19 infection. Exclusions to public liability cover and industrial special risks (ISR) property insurance for communicable diseases such as COVID-19 were in place prior the outbreak of the pandemic, but some policies failed to reference the relevant legislation, creating ambiguity around the scope of the exclusion. There are a number of well publicised test and class actions in Australia against insurers under way, but these are not discussed here.

Gallagher Senior Claims Executive - Financial Lines, Claims Advocacy, Pooja Khushalani, explains that most, if not all, insurers have now rectified the perceived error of citing the Quarantine Act 1908 rather than the Biosecurity Act 2015. Since this came to insurers’ attention from April to June 2020 all updated annual policies can be expected to include the relevant legislation and therefore grounds for exclusion.

We have also seen the communicable disease policy exclusions for public liability and ISR covers  expanded to make the scope of the exclusion wider and therefore unlikely to provide cover for any COVID-19 claims. These exclusions are now being included in professional indemnity policies but other forms of business cover such as management liability, directors and officers’ liability, employment practices liability, cyber and crime are less likely to have expanded the scope of exclusions. Depending on the type of claim there may be cover for costs associated   with COVID-19 infections in business premises. These may include being investigated by the health authorities for an outbreak or standing down an employee due to not getting vaccinated. 

What constitutes legal liability for COVID-19 infection for businesses?

Businesses have a responsibility to limit COVID-19 transmission in their premises. 
From a legal liability perspective businesses should consider 
1.    is there a duty of care inherent in the nature of the business?
2.    has this duty been breached by any action or omission?
3.    has a breach of this duty caused a loss for an affected third party?
4.    what is the value of the loss? 

If we take the example of a nursing home, the organisation has duty to protect the residents. A court would expect the client to take reasonable precautions to prevent the spread of COVID-19. 
These could include 
•    ensuring all workers are vaccinated
•    isolating positive residents
•    social distancing
•    temperature testing anyone entering the premises
•    requiring the use of masks and personal protective equipment. 

Whether a court would view it as reasonable for the nursing home to undertake these actions would depend on the cost, inconvenience and effectiveness of the action. The potential impact of not taking preventative measures would also have a bearing. For example, enforcing mask wearing is a simple cost-effective method to addressing reduction of the spread of COVID-19. 

Due to the nature of the organisation, the work performed and the expertise required as part of its business activities a nursing home bears a higher duty of care. Other business would not be subject to the same level of duty of care expectations.

For example, by contrast, a supermarket doesn’t require medically trained staff, isn’t caring for elderly residents and is also open to the public. A supermarket would need to consider what the business can control and what is reasonable for them to implement into their operations. This may include staff being vaccinated, the use of masks and social distancing. 

What happens a business is faced with a COVID-19 infection liability claim?

In the case where someone outside of the business contracts COVID-19 and attempts to bring a claim against a business where they believe they contracted the illness due to attending its premises, the causation element will kick in. The likely test that will be adopted by the courts will be ‘but for’ the claimant visiting the business premises they would not have contracted COVID-19. 

This would be extremely difficult to prove since COVID-19 is so contagious it can be picked up almost anywhere, unless the claimant can provide genomic sequencing to tie it back to the business. Additionally businesses can claim the defence that carriers of COVID-19 can often be asymptomatic. 

As long as the business has taken reasonable precautions fit for purpose for the duty of care required by its industry and type, it should meet the legal requirements for a responsible operator. 
In regard to their own employees, under the Work Health and Safety Act businesses must address health risks identified in their workplace by either eliminating or minimising them as far as practicable. This includes threats to mental health such as work-related stress.

For workers’ compensation claims for infection with COVID-19 at work, some industry sectors are considered to be at high risk of transmission. These include service providers such as transport, entertainment, hospitality, education, retail, healthcare and community services such as police, fire brigades, courts and prisons.

What can businesses do to protect themselves against COVID infection claims?

The cost of COVID-19 infection claims are unknown and will depend on the severity of the illness contracted. As symptoms range from comparable to flu to fatal, the damage component will be significantly different. 

As noted, many insurance policies now specify communicable disease exclusions which will completely exclude any claim concerning COVID-19. This makes it critical for businesses to implement COVID-19 plans, because a successful claim could have a significant impact.

Business owners and boards should ensure they comply with COVIDSafe business requirements as a minimum and also consider getting expert advice around developing a strategy for preventing the spread of COVID-19 in their premises. These plans should be documented and record how enforcement will be achieved.

Can businesses require their employees to be vaccinated?

Generally speaking, according to Gallagher Manager, Workplace Risk, Jim Kydas, an Australian employer can mandate that employees receive COVID-19 vaccinations, with some very important exceptions. 
Taking a full range of considerations, discussed with both internal and external advisors, into account will help achieve a balanced position on the business or employer’s position on COVID-19 vaccinations of staff. 

Relevant factors might include 
•    logistical constraints around supply
•    distribution and administration challenges
•    evolving public health policy
•    potential employee concerns about vaccines and any personal medical conditions
•    safety of the local community.

Incentivising staff to participate in vaccination

Employers can both encourage and incentivise their staff to receive vaccinations through measures such as hosting vaccination clinics in the workplace, but this is easier said than done. Alternative steps to encourage vaccination might include
•    establishing policies that allow employees to take paid leave to seek COVID-19 vaccination elsewhere in the community.
•    supporting transportation to offsite clinics.
•    sharing information with employees about the importance of the COVID-19 vaccination.
•    announcing community locations offering the vaccination.

Employers can also incentivise employees by providing paid time off for recovery from side effects and by offering cash or non-cash incentives to employees who get vaccinated. 

Get expert business insurance advice

Understanding how to manage the business risks associated with COVID-19 infection will help inform how businesses can protect themselves, their staff, customers and the wider community. Talk to one of our business insurance experts for support and advice on your business risks. 


Further reading


FAQs to help organisations navigate their way through COVID-19 mandating vaccinations

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Business Insurance and Risk Market update H2 21

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Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.
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