Reopening Offices Could Draw Insurer Scrutiny, Marsh Says

By Martin Croucher
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Law360, London (September 16, 2020, 4:51 PM BST) -- Insurers could ramp up scrutiny on businesses reopening after COVID-19-related lockdowns or reduce their coverage due to the risk of outbreaks of Legionnaires' disease, Marsh Inc. said in a new report.

The global insurance broker said Tuesday that if offices have been left unoccupied for months, waterborne pathogens might have built up and could be circulated by air conditioning units when the locations are reopened.

Legionnaires' disease is a type of pneumonia that is developed when fine drops of water containing legionella bacteria are inhaled. The company said Tuesday that businesses should take steps to ensure water systems are free of bacteria growth when staff return.

"Insurers might limit Legionnaire's coverage amounts or impose higher deductibles if building systems are outdated," Darren Holmes, senior vice president at Marsh and the author of the report, said.

"Insurers may also be stepping up their scrutiny even more due to the coronavirus pandemic, making it important to follow and implement key steps when considering reopening," he added.

Holmes noted that staff members who have previously had COVID-19 could be more susceptible to Legionnaires' disease because of a compromised respiratory system.

Companies are at risk of legal claims from staff members if they catch the disease at work, and an outbreak could mean businesses are forced to claim on employers' liability insurance policies.

Typically, outbreaks of Legionnaires' disease can trigger a temporary closure by a public authority, a loss that would normally be covered by a notifiable disease extension in a business interruption policy.

Many U.K. businesses attempted to claim on those policy extensions when the government ordered a lockdown as a result of the COVID-19 pandemic. After a wave of rejections, the Financial Conduct Authority launched a High Court test case that would determine insurer liability.

As a result of the legal disputes, insurers have been reexamining those extensions and adding exclusions for specific viruses, including COVID-19.

Hiscox chief executive Bronek Masojada, whose company was involved in the FCA test case, said business interruption policies now contain exclusions on COVID-19 at renewal.

Ratings agency Moody's said the "policy language cleanup" was potentially wider, at least at the level of reinsurance.

"New reinsurance policies will contain tighter terms and conditions with specific exclusions for viruses and pandemic," the company said last week.

--Editing by Daniel King.

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