As swine flu continues its spread, insurance agents and brokers can expect increasing questions from their policyholders about coverage.

Agents should remain “alert,” keeping their eyes on daily news updates from the Centers for Disease Control website, said Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute.

“At the moment it is fair to say this is a very manageable situation,” Weisbart told IFAwebnews.com. “We know what to do in a practical sense, and we know how and where [the flu] is. The best thing agents and brokers can do is pay attention to the news.”

Over the last two weeks, more than 100 people in the U.S. are believed to have swine flu, which causes flu-like systems, which, when treated early, do not cause serious injury. The U.S. government has declared a health emergency and the World Health Organization has raised its pandemic alert level to phase 5, indicating human-to-human spreading of the virus into at least two countries and a strong signal that a pandemic is imminent.

Marc Rosenthal

Marc Rosenthal, a partner in the insurance coverage practice group at Proskauer Rose LLP in Chicago, said companies will be looking to see if their insurance coverages can help them as they see significant employee absences, travel restrictions and cancellation of events, as well as possible restrictions on the shipment of goods to or from affected areas, and premises may be come contaminated.

“For some, the existence of insurance coverage can help lessen the economic loss,” Rosenthal said in an email. “While it is unlikely that businesses will be able to go out and purchase insurance today to cover pandemic-related losses, agents and brokers should advise their clients to (1) look at all types of existing coverage, (2) give prompt notice to insurers, and (3) keep good records of loss.”

Rosenthal said agents and brokers should be ready to review policy language to determine if coverage applies.

Several policies could apply

Rosenthal said that in addition to the more obvious coverage provided by group health insurance and workers’ compensation/employer’s liability policies, several other policies also may apply.

“Travel and event cancellation insurance may well be triggered and likely do not have a swine flu exclusion,” Rosenthal said. “Manufacturing or distribution companies may have property damage, business interruption or product recall insurance that may apply.  Policy language can differ significantly, and some policies may not require physical damage to trigger business interruption coverage, and many include extensions to cover loss caused by, for example, orders of civil authority or inability to access the policyholders’ premises.

In addition, the contamination of a building or of raw materials or finished products may also lead to losses covered by insurance.”

Rosenthal also noted that in the event lawsuits ultimately arise as a result of alleged acts or omissions in dealing with the outbreak, liability or directors & officers policies may provide “at least coverage for the defense of such litigation.”

However, Weisbart said business interruptions caused by swine flu are “likely not a covered peril.” Most business interruption policies are written in conjunction with property coverage, and because the flu isn’t like a fire that shuts down a business, it would not be covered, he said.

“The triggers are not the same as fire,” Weisbart said.

Steps to take for agencies

As a result, Weisbart is encouraging agents to focus their attention to risk management and mitigation, including in their own businesses. Insurance agency owners, like other owners, should amend their employee absence policy to exclude swine-flu absences from those counted against an employee’s total, thus keeping people who could spread the flu from spreading it in the office. He added that agency owners should ensure adequate soap, water and other cleaning products are available to their employees, as constant cleaning is seen as the best defense against the flu.

Governments are better prepared to handle the latest possible pandemic because of the lessons learned in 2005 when avian flu spread in parts of the world, said Weisbart, who studied the 2005 spread of avian flu.

“The system is extremely well prepared for any level of imaginable death or incident related to swine flu,” Weisbart said. “If it [a pandemic] happens, we have a sense of what to do. In 2005, we didn’t know much.”