On 11th March 2020, the World Health Organisation has made its assessment and announced that COVID-19 can be characterised as a pandemic. The world has since then sighted its first pandemic caused by coronavirus.
With over 1 million confirmed cases across the globe as of today, the outbreak of COVID-19 has impacted nearly every industry out there. As the coronavirus disease is spread primarily through close contact with an infected person or infected surface, many countries have taken drastic measures to prevent its spread including cancelling or postponing events as they generally attract mass gatherings. From the cancellation of the World Mobile Congress Barcelona 2020, the largest smartphone conference in the world, to the postponement of the world important sports event, namely the 2020 Summer Olympics in Tokyo, these are among the many events being affected by the pandemic.
Planning and staging events generally involve high risks, exposures and expenses, especially with global-scaled events. These factors generally attract organisers to take up event cancellation insurance as contingency against cancellation or postponement. The insurance market is therefore likely to face possible claims as a result of the cancellation or postponement of events in light of the COVID-19 outbreak.
A claim from an event cancellation insurance depends on whether the risk or peril which caused the cancellation or postponement is covered under such insurance policy. Whilst it is possible to have an event cancellation insurance be tailored to cover the risks of infectious or contagious diseases, many event cancellation insurance excludes cover for communicable diseases such as Severe Acute Respiratory Syndrome (“SARS”), Avian Flu, Swine Flu and other types of influenza pandemic.
In relying on such exclusion, an insurer bears the burden of proof in proving that the loss and/or the cause of the loss, i.e. COVID-19, falls within its ambit. A careful analysis and interpretation of the wordings of such exclusion clause is thus pertinent. Some exclusion clauses may be specific where they expressly exclude an exhaustive list of communicable diseases whilst there are exclusion clauses which contain sweeping provisions such as “any other” flu variant or communicable diseases. Generally, parties will likely require expert evidence to show whether the cancellation or postponement of an event was proximately caused by the COVID-19 pandemic or by other causes.
There have been quite a number of epidemic/pandemic outbreaks such as SARS and H1NI in the past which is now followed by the COVID-19. It would be interesting to see how the insurance market moves forward as whilst it is likely that many insurers may expressly include COVID-19 as an excluded peril from now on, it may at the same time make commercial sense to introduce specialised insurance policy related to epidemic/pandemic as a way for the insurance market to tackle the increasing outbreaks.
Please note that this material does not and is not intended to constitute legal advice. It is for general information purposes only.
If you have any questions or require any legal advice, please do not hesitate to contact any of us.
|Lam Ko Luen