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COVID-19: Are There Any Weird Homeowners’ Coverage Exposures?

Author: Chris Boggs

Currently 42 states are under a “stay-at-home," “shelter-at-home" or some other similar order. However, this does not necessarily keep people in their homes.

People leave their homes for necessities (healthcare, medicine, groceries, take-out orders, etc.) or to exercise. Some work in businesses than have become known as “essential" and are going to work every day. Still others are going outside to visit and/or check on friends and neighbors.

But some are even going inside each other's homes. There are reports that parties, albeit small, are being held.

This leads to the question: Does having friends over during a state-mandated stay-at-home order create any insurance issues regarding COVID-19? What about when it's over? These sound like weird questions.  

As weird as the questions sounds, the answer may be weirder. If the insured is held legally liable for someone contracting COVID-19, or any other disease, while at a house party, there may not be any coverage extended from the homeowners' policy.

Don't believe me? Here is the relevant policy language:

SECTION II – EXCLUSIONS

E. Coverage E – Personal Liability And Coverage F – Medical Payments To Others

Coverages E and F do not apply to the following:

6. Communicable Disease

"Bodily injury" or "property damage" which arises out of the transmission of a communicable disease by an "insured"

A Communicable Disease?

COVID-19 is unquestionably communicable; but is it a disease? In a “roundabout" way, yes. It's not the virus that causes harm, it's the disease or sickness that results from the virus. The immune system destroys some viruses before they can cause any harm, but some viruses overpower the immune system and lead to sickness and disease.

Because COVID-19 is a communicable disease, if the insured “communicates" the disease to someone else, the exclusion applies.

Legally Liable

If the insured throws a “stuck-in-the-house" party or other gathering and about 14 days later one of the guests is diagnosed with COVID-19, the natural inclination would be to assume the disease was contracted at the party. Once the lawyers begin trolling, the ill person will certainly be convinced to sue the party host asserting that:

  • The host made them sick (read the exclusion, remember, an insured must spread the disease); and
  • The homeowner was negligent in and legally liable for causing the sickness.

To be found negligent in the process of ultimately proving legal liability, the injured person must:

  • Prove the accused homeowner is guilty of "Negligent Conduct." To prove negligent conduct, the injured person must prove the homeowner owed a duty to the injured party and breached that duty owed; 
  • Suffer actual monetary damages; and
  • Prove the wrongdoer's "Negligent Conduct" is the proximate cause of the injury or damage.

There are far more nuances and legalities than the above to ultimately establish legal liability, but detailing legal liability is not the focus of this article. For more information on what is required to prove legal liability see, “How Does a 'Person' Become Legally Liable."

Proving negligent conduct and legal liability often requires court involvement. If:

  • An insured hosts a party during a lockdown;
  • An insured is contagious; and
  • A guest is sickened by that insured…

The communicable disease exclusion somewhat clearly excludes more than just coverage, it also excludes defense.

A Different Situation. A Different Result?

Let's change the situation. Assume a guest at the party rather than an insured is sick and passes along the little nasty; does this exclusion apply to the homeowner/host?

If the policy is taken literally, which is the expectation, the exclusion does not apply. Notice again that the exclusion applies only when an insured communicates the disease to someone, not when their actions make it possible for the disease to be communicated by and to someone else.

So, the infected and contagious next-door neighbor is invited. During the party she spreads the virus to other party guests. One gets sick and sues the homeowner. Is the homeowner covered for this suit? Yes, this appears to be covered because an insured did not communicate the disease; they only made it possible for the disease to be spread.

But just like in the previous example, the injured party must prove the homeowner/host was guilty of negligent conduct and is legally liable. In this case, the legal precept proximate cause (the “but for" requirement) seems to indicate that, “But for the insured hosting the party, there would not have been bodily injury."

Even if the homeowner is not found or held to be legally liable for the sickness, the policy pays to defend the insured because this is not an excluded incident.

What About the Neighbor

What about the neighbor? Is she covered for making the other guest sick?

No, there is no coverage. This points directly back to the applicable exclusionary wording. A liability exclusion is not limited to the insured's premises. If the insured communicates the disease to another person – even at a party – the exclusion applies.

Parties or No Parties

Homeowners' coverage, or the lack thereof, for spreading COVID-19 isn't a weird question. Depending on the situation, coverage may be excluded for the insured. Don't host or attend parties for a while.

Last Updated: April 9, 2020


 



 


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