COVID-19 & Insurance Coverage for Employee Claims

The COVID-19 pandemic presents a monumental change in the business insurance landscape.  This includes the relationship between employees and employers.  Inevitably, many employees will contract COVID-19 in the workplace.  In such cases, Employers’ first questions will almost certainly be (1) will worker’s compensation cover this, (2) if not, am I liable, and (3) if I am liable, is it covered by my insurance?  This area of insurance coverage law is rapidly developing.  Current short answers to these questions are:

  1. Most employee COVID-19 illnesses will not be covered under worker’s compensation;
  2. An employee may have viable claims against the employer if the employer failed to take reasonable steps to protect its employees; and
  3. While typical business liability policies cover bodily injury or death claims, they exclude from such coverage claims by employees who suffer such injuries in the course of employment.  However, employers may have arguments that such claims will be covered by stop-gap employer’s liability coverage, depending on the facts of the claim.

Worker’s Compensation Usually Won’t Apply to COVID-19 in the Workplace

Understandably, employers’ first instinct will be that workplace COVID-19 claims should be covered by worker’s compensation.  However, the Washington Department of Labor and Industries has (thus far) granted workers’ claims only if the worker’s job created an unusually high risk for contracting COVID-19, such as medical professionals or first responders.  According to the Department of Labor and Industries’ current guidance:

Under certain circumstances, claims from health care providers and first responders involving COVID-19 may be allowed. Other claims that meet certain criteria for exposure will be considered on a case-by-case basis.

In most cases, exposure and/or contraction of COVID-19 is not considered to be an allowable, work-related condition.

Unless altered by subsequent governmental action, based on this guidance, the vast majority of COVID-19 transmissions to employees will not be covered under worker’s compensation.

Employees May Seek Compensation Directly from Employers for COVID-19 Claims

With worker’s compensation unavailable to cover COVID-19 in most cases, the employee may seek compensation from his or her employer.  Indeed, any employer who does not take measures reasonably designed to protect employees against the COVID-19 hazard runs the risk of allegations that the employer’s lack of precaution caused an otherwise preventable infection.  With more businesses re-opening or increasing their work force to previous levels, this will become a more acute issue.  The less precautions an employer takes, the higher the risk that an employee will allege the employer is at fault.  For example, just as an employer who fails to protect employees from toxic materials may be liable to the employee, an employer may also be liable for failing to protect employees from COVID-19.

Courts have yet to address the extent of employer’s exposure on this subject.  But given this uncertainty, prudent employers will diligently protect employees from unnecessary risk and follow public health directives to minimize exposure.

Are Employee-COVID-19 Claims Covered Under Typical Business Liability Policies?

Employers will be familiar with the coverage generally provided by Commercial General Liability (“CGL”) insurance.  CGL policies generally cover liability for bodily injury or death caused by an insured business.  But, CGL coverage usually excludes coverage for claims by employees for bodily injury or death incurred in the course of employment.  Indeed, such injuries typically fall within the scope of worker’s compensation.  But as described above, worker’s compensation, at least in Washington, currently will not fill the gap left by this CGL exclusion in the context of employee damage claims arising from COVID-19.

Even if an employee claims that he or she contracted COVID-19 due to an employer’s negligence, and even if that claim is not covered under the primary terms of a CGL policy or worker’s compensation, insurance coverage may be available.  Washington employers typically carry stop-gap employer’s liability coverage as an endorsement to their CGL policy.  The purpose of this coverage is to fill the “gaps” where worker’s compensation otherwise will not cover claims arising from an employee’s workplace injury or illness.  In effect, such an endorsement gives coverage back, even though the exclusion described above would otherwise leave the claim uncovered.  A typical stop-gap endorsement will cover a claim if “Bodily injury by accident or bodily injury by disease arises out of and in the course of the injured employee’s employment.”   In cases where a COVID-19 infection can be traced to the workplace, an employer should have grounds to argue this is a covered claim. 

Consider, for example, a construction worker who contracts COVID-19.  Contact tracing indicates that the infection occurred on the jobsite.  The worker is not a medical professional or first responder, and therefore the infection is not covered by worker’s compensation.  Thus, the worker files an action against the employer, alleging the employer is responsible for the infection.  Under these facts, the employer has a reasonably strong argument that the “disease arises out of and in the course of the injured employee’s employment.”  If so, the claim should be covered under stop gap employer’s liability coverage.

Given how recently COVID-19 began impacting businesses, courts have yet to address whether stop gap employer’s liability coverage will cover employee illness.  In all likelihood, whether coverage is available will turn on the facts relevant to the specific claim, such as the employer’s diligence and the evidence of transmission in the workplace.  But for the time being, employers should have arguments for coverage.  Court decisions in the coming months and years will shed light on the strength of coverage claims. 

If you or your company have any questions regarding insurance and COVID-19, please do not hesitate to reach out to the MPBA insurance coverage practice group.

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