As federal and state governments begin to outline broad plans for opening up the economy, many businesses are bracing for the risks inherent in operating in the post-quarantine era. In reopening their doors to the public, businesses may be opening up to coronavirus-related liability claims. For example, customers may assert claims that they were infected with COVID-19 because of the alleged actions or inactions of a business or its employees. Regardless of the merits of the underlying claim, several types of insurance policies may be implicated by these likely lawsuits.
Commercial general liability ("CGL") insurance policies are generally a business's first line of defense against claims of bodily and/or property damage brought by third parties. However, CGL policies typically contain exclusions that may affect coverage for coronavirus-related lawsuits. For example, CGL policies contain a broad "pollution exclusion" which precludes from coverage claims arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants. Pollutants are typically defined as including any solid, liquid, gaseous or thermal contaminant.
One potential source of CGL coverage disputes will likely involve whether spreading the transmittal of a virus constitutes a "discharge, dispersal, seepage, migration, release or escape" of a "pollutant." While the pollution exclusion has been a constant source of litigation for over forty years, this issue is largely unchartered territory as the exclusion is typically litigated in the context of environmental pollution claims. In fact, many courts, including the Ohio Supreme Court, largely limit the application of the pollution exclusion to injuries caused by "traditional environmental pollution." Andersen v. Highland House Co., 2001-Ohio-1607, 93 Ohio St. 3d 547, 552, 757 N.E.2d 329, 334, quoting Am. States Ins. Co. v. Koloms (1997), 177 Ill. 2d 473, 492-493, 227 Ill. Dec. 149, 158, 687 N.E.2d 72, 81 ("We would be remiss ... if we were to simply look to the bare words of the exclusion, ignore its raison d'etre, and apply it to situations which do not remotely resemble traditional environmental contamination.")
Other courts, however, have held that a pollution exclusion bars coverage for all injuries caused by the release of a contaminants, even where the contaminant is dispersed in an indoor area. For example, in Nova Cas. Co. v. Waserstein, 424 F. Supp. 2d 1325 (S.D. Fla. 2006), the underlying suit alleged that the plaintiffs were injured because the defendants negligently failed to keep the air and surfaces in the building clean allowing "microbial populations" and "indoor allergens" to travel from surfaces in the building, through the air, and came in contact with the plaintiffs. The court held that the pollution exclusion applied because "microbial populations" and "indoor allergens" fall within the definition of "pollutants." See also Landshire Fast Foods of Milwaukee, Inc. v. Emplrs. Mut. Cas. Co., 2004 WI App 29, ¶19, 269 Wis. 2d 775, 785, 676 N.W.2d 528, 533 ("Bacteria, such as Listeria monocytogenes, when it renders a product impaired or impure, falls squarely within the plain and ordinary meaning of 'contaminant.'").
While the pollution exclusion appears to be another source of uncertainty clouding the business risks caused by COVID-19, it seems likely that courts will soon be required to resolve this issue.
Finally, it is important to note that some insurers have already tried to eliminate the uncertainty of the pollution exclusion by including an additional exclusion for damages caused by a virus or other pandemic. So, it is critical for you to read and understand all components of your CGL policy, as well as any other policies you have, to understand what coverage is and is not available to protect your business.