LMA5595 and LMA5596 PFAS Exclusions for Liability policies

Posted on by Stephen Tomlinson

 LMA PFAS Exclusions

Lloyd’s Market Association Bulletin LMA22-024-CM was issued in August 2022 and included two PFAS exclusions – LMA5595 and LMA5596 – for liability insurance and liability reinsurance policies. This article considers the background to these PFAS exclusions before analysing the exclusions themselves.

Background to PFAS Exclusions

PFASs Definition

According to the OECD, PFASs are fluorinated substances that contain at least one fully fluorinated methyl or methylene carbon atom (without any H/Cl/Br/I atom attached to it), i.e. with a few noted exceptions, any chemical with at least a perfluorinated methyl group (–CF3) or a perfluorinated methylene group (–CF2–) is a PFAS. PFASs include perfluorosulfonic acids, such as perfluorooctanesulfonic acid (PFOS), and perfluorocarboxylic acids like perfluorooctanoic acid (PFOA).

PFAS Use

PFASs are surfactants, i.e. reduce the surface tension between a liquid and another liquid or solid, making them effective in resisting fire and repelling water, oil, and grease. PFASs are found in materials such as firefighting foam, nonstick cooking pots and pans, paints, coatings for cables and wires, lubricants, food packaging, and textiles. Furthermore, PFASs are water soluble and appear to move through soil. PFASs are commonly described as persistent organic pollutants or “forever chemicals” because they remain in the environment for long periods of time.

PFAS Health Effects

Increasing PFAS litigation – see below – has been driven by growing evidence that PFASs are harmful to the environment and health. A 2022 National Academies of Sciences, Engineering, and Medicine report noted that:

  • PFAS exposure was linked to increased risk of dyslipidemia (abnormally high cholesterol), sub-optimal antibody response, reduced infant and foetal growth, and higher rates of kidney cancer; and
  • drinking water is contaminated with PFASs in thousands of communities across the United States.

Increasing PFAS Litigation

The LMA5595 and LMA5596 PFAS exclusions are a response to increasing private tort lawsuits and government enforcement of environmental laws and regulations. In the USA, for example, more than 6,400 PFAS-related lawsuits have been filed in its federal court since 2005; of these, more than 1,000 were filed in 2021 concerning firefighting foam. Initially, the defendants in such litigation tended to be primary producers of PFAS such as chemical companies and manufacturers of fire-suppressant foams. More recent litigation, however, recent litigation has targeted secondary manufacturers, textile manufacturers, cosmetics manufacturers, fashion and fast food companies.

There has been speculation that this increasing litigation could expose insurers to unanticipated claims, akin to asbestos claims (see, for example, ‘PFAS: The Next Asbestos‘?). Two examples of significant PFAS litigation are described below.

DuPont class action and settlement (West Virigina)

In February 2017, DuPont and its spin-off Chemours paid USD $671 million to settle lawsuits for 3,550 personal injury claims related to PFOA release from their Parkersburg plant into the drinking water. The settlement came after a court-created independent scientific panel, the C8 Science Panel, found a ‘probable link‘ between PFOA (also known as C-8) exposure and six illnesses: kidney and testicular cancer, ulcerative colitis, thyroid disease, pregnancy-induced hypertension and high cholesterol.

3M settlement with Minnesota

In February 2018, 3M settled a lawsuit brought by the state of Minnesota for USD $850 million; Minnesota had sought judgment for USD $5 billion. The lawsuit alleged that:

  • 3M dumped chemicals at sites near Minneapolis for more than 40 years, enabling them to get into wildlife and drinking water; and
  • 3M knew the chemicals were harmful but concealed the effects from regulators and distorted science on them.

Analysis of the LMA5595 and LMA5956 PFAS Exclusions

Are LMA5595 and LMA5596 necessary?

As noted above, LMA5595 and LMA5596 PFAS exclusions have been developed for liability insurance and liability reinsurance policies. Whether the LMA5595 or LMA5596 are necessary will depend upon the pollution exclusion in the policy. If applied in reinsurance contracts, however, then insurers may then apply them to policies they issue to avoid reinsurance gaps.

For Liability policies written on an occurrence basis, the LMA5595 and LMA5596 PFAS exclusions would only serve to exclude liability in future policies. For past occurrences, the Liability policies in force at that time will have to respond to the claim, subject to the pollution exclusions.

In the USA, it is understood that most insurers inserted ‘absolute’ or ‘total’ pollution exclusions after 1985. According to Pillsbury, however, ‘[i]n nearly half the states, policies containing this form of pollution exclusion have been held to be ambiguous and to provide coverage for pollution that was not expected or intended.’

LMA5595 and LMA5596: broad exclusions on PFAS liability

Broadly, paragraph 1 of the LMA5595 and LMA5596 endorsements exclude claims in connection with any PFAS – please refer to the endorsements for the exact wording. The LMA5595 and LMA5596 also contain anti-concurrent terms (see ‘regardless of any other cause contributing concurrently or in any sequence’). Paragraph 2 then acts as a clarification that the exclusion applies to costs to clean-up, monitor or assess the effect of any PFAS.

Difference: LMA5596 reverses the burden of proof

The difference between LMA5595 and LMA5596 is that LMA5596 has an additional paragraph which reverses the onus of proof (‘If UNDERWRITERS allege that this Exclusion applies to any claim under this POLICY the burden of proving the contrary shall be upon the INSURED’). Here, it may be appropriate to consider:

  1. what would be required for the ‘underwriters’ to allege that the exclusion applies?
  2. if there is more than one insurer for the policy, how would this clause operate?
  3. what justifies reversing the onus of proof? Parties to an insurance contract may specify who bears the onus of proving a particular fact, even if this involves reversing the onus of proof: see Levy v Assicurazione Generali [1940] AC 791. However, reversing the onus of proof is contrary to the interests of insureds and conflicts with the traditional position whereby the insurer must prove that an exclusion applies. Given the resources and expertise of insurance companies, it is difficult to see how reversing the burden of proof could lead to more equitable outcomes.

LMA5595 and LMA5596 definition of ‘PFAS’

In their final paragraphs, LMA5595 and LMA5596 define ‘PFAS’ as ‘any organic molecule, salt, free radical or ion, the composition of which includes at least one:

a. perfluorinated methyl group (-CF3); or

b. perfluorinated methylene group (-CF2-).’

This definition differs from that use by the OECD (see ‘PFASs Definition‘, above) due to its use of ‘organic molecule, salt, free radical or ion’. While the difference may not be material, the source of the LMA definition is not known (to this author) and it is unclear why the LMA would not use the more common OECD definition.

LMA5468A, LMA5469A and LMA5470A: Amended Cyber and Data endorsements for Liability policies

Posted on by Stephen Tomlinson

Background

While LMA5469A was issued in October 2022, LMA5468A and LMA5470A were issued on 15 March 2023 (beware the Ides of March!). Since LMA5468A, LMA5469A and LMA5470A are similar to their LMA5468, LMA5469 and LMA5470 predecessors, I recommend reading the analysis of those endorsements separately since I have chosen not to reproduce it here.

In LMA Bulletin LMA22-034-SD, the LMA stated that the changes to LMA5469 made for LMA5469A were ‘to clarify that the limited write-back of cover to the exclusion is subject to all the terms, conditions and exclusions of the policy (and any attached endorsements)’. This statement, however, does not tell the full story since the changes amount to more than a ‘clarification’.

Changing how LMA5468A, LMA5469A and LMA5470A operate

For each of LMA5468A, LMA5469A and LMA5470A, the primacy clauses of their predecessors have been deleted:

‘This endorsement supersedes any other wording in the Policy or any endorsement thereto having a bearing on a Cyber Act, Cyber Incident or Data, and, if in conflict with such wording, replaces it’.

This change should be considered in conjunction with the change to the preamble for the exceptions in paragraph 2:

‘Subject to all the terms, conditions and exclusions contained in this Policy or any endorsement thereto…’

Taken together, these changes are significant because they mean that other exclusions in the policy or attached to the policy – including those relating to cyber or data risks – could operate alongside those of LMA5468A, LMA5469A or LMA5470A. And if any exclusion in the policy applies to an insured’s claim, the claim is excluded. As such, these changes increase the likelihood that an insured’s claim will be excluded.

Rather than ‘clarifying’ how the LMA5468A, LMA5469A or LMA5470A apply, it would be more accurate to say that the exceptions to the exclusions in the amended versions operate differently because they are also subject to the underlying policy’s other exclusions.

Other changes

Other changes introduced in LMA5468A, LMA5469A or LMA5470A are as follows:

  1. For LMA5469A and LMA5470A, the exceptions to the exclusions now appear in paragraph 2 (i.e. immediately after the exclusions of paragraph 1); and,
  2. The definition paragraphs are not numbered. As a result, the definition of ‘Cyber Incident’ has sub-clauses (a) and (b), which is inconsistent with the other sub-clauses of the wording which are numbered 1.1, 1.2, 2.1 and 2.2.

Summary of LMA5468A, LMA5469A and LMA5470A

Exclusion LMA5468A LMA5469A LMA5470A
Cyber Act: loss or damage in connection with unauthorised, malicious or criminal act involving access to or use of an electronic device Excluded Excluded Excluded
Cyber Incident #1: loss or damage in connection with error or omission involving access to or use of an electronic device Excluded Excluded Excluded
Cyber Incident #2: loss or damage in connection with the unavailability or failure to access or use an electronic device Excluded Excluded Excluded
Any action taken in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident Excluded Excluded Excluded
Loss of use or reduction in functionality of Data Excluded Excluded Excluded
Repair, replacement, restoration, reproduction of Data Excluded Excluded Excluded
Loss or theft of Data Excluded Excluded Excluded
Value of Data Excluded Excluded Excluded
Exceptions
If arising out of a Cyber Incident, exceptions for: 1) third party bodily injury; and 2) physical damage to or destruction of third party property. No such exception Excepted Excepted
If arising out of a Cyber Act, exceptions for: 1) third party bodily injury; and 2) physical damage to or destruction of third party property. No such exception No such exception Excepted

LMA5468, LMA5469 and LMA5470: Cyber and Data endorsements for Liability policies

Posted on by Stephen Tomlinson

Background

LMA5468, LMA5469 and LMA5470 are Cyber and Data Exclusion Endorsements for Liability policies that were released by the LMA in November 2020.

At their broadest, LMA5468, LMA5469 and LMA5470 all exclude liability ‘in connection with’:

  1. any Cyber Act;
  2. any Cyber Incident;
  3. any action taken in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident;
  4. any loss of use or reduction in functionality of any Data;
  5. any repair, replacement, restoration, reproduction of any Data;
  6. any loss or theft of any Data; or
  7. any amount pertaining to the value of such Data.

Where the exclusions differ, however, is in their exceptions: LMA5468 has none, LMA5469 has an exception for Cyber Incidents, and LMA5470 has exceptions for both Cyber Incidents and Cyber Acts.

Exclusion LMA5468 LMA5469 LMA5470
Cyber Act: loss or damage in connection with unauthorised, malicious or criminal act involving access to or use of an electronic device Excluded Excluded Excluded
Cyber Incident #1: loss or damage in connection with error or omission involving access to or use of an electronic device Excluded Excluded Excluded
Cyber Incident #2: loss or damage in connection with the unavailability or failure to access or use an electronic device Excluded Excluded Excluded
Any action taken in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident Excluded Excluded Excluded
Loss of use or reduction in functionality of Data Excluded Excluded Excluded
Repair, replacement, restoration, reproduction of Data Excluded Excluded Excluded
Loss or theft of Data Excluded Excluded Excluded
Value of Data Excluded Excluded Excluded
Exceptions
If arising out of a Cyber Incident, exceptions for: 1) third party bodily injury; and 2) physical damage to or destruction of third party property. No such exception Excepted Excepted
If arising out of a Cyber Act, exceptions for: 1) third party bodily injury; and 2) physical damage to or destruction of third party property. No such exception No such exception Excepted

Overview of the definitions

As noted elsewhere on insurance-endorsements.com, the definitions of Cyber Act, Cyber Incident, Computer System and Data are problematic. For example,

  1. Cyber Act means ‘an unauthorised, malicious or criminal act or series of related unauthorised, malicious or criminal acts, regardless of time and place, or the threat or hoax thereof involving access to, processing of, use of or operation of any Computer System.’ In this definition, it is unclear how ‘unauthorised’ should be interpreted. Is it from the perspective of the insured? If an act has not been authorised, does that mean it is unauthorised? If an employee unintentionally exceeds their authority, is that unauthorised? If an authorised employee commits an act that violates a policy, does that make it unauthorised? These questions could have been avoided if the LMA had sought to define a ‘Cyber Act’ in terms of actual cyber threats rather than generalities.
  2. Cyber Incident has two limbs:
    1. an error or omission involving access, processing, use or operation of a Computer System. For this limb, it appears that the errors or omissions could be by the insured or a third party. But it is appropriate to consider: where is the cyber risk here? Separately, the second limb of ‘Cyber Incident’ is concerned with the outcome rather than the cause – this makes the Cyber Incident exclusion very broad and means that it could exclude liability in the absence of an actual cyber risk; and
    2. any unavailability (whether partial or total) or failure to access, process, use or operate (whether partial or total) any Computer System.
  3. The definition of Computer System includes ‘any electronic device’. While the concept of a computer system has undoubtedly changed over time, not every electronic device is a computer system. In this respect, the LMA’s definition of Computer System over-reaches;
  4. Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System [emphasis added]. Since physical documents could be scanned, photocopied or faxed, such documents could be ‘Data’. It would be more appropriate if Data were re-defined such that it was limited to electronic data (perhaps even using ‘electronic data’ without definition) and did not extend to physical documents.

Re-thinking the Data exclusions

Paragraph 1.2 of LMA5468, LMA5469 and LMA5470 contains the ‘Data’ exclusions, excluding liability in connection with any:

1.2 loss of use, reduction in functionality, repair, replacement, restoration, reproduction, loss or theft of any Data, including any amount pertaining to the value of such Data;

Paragraph 1.2 is problematic because it puts separate exclusions into a single clause and seems to confuse what could be termed ‘circumstance’ and ‘property’ exclusions. Consider if paragraph 1 of LMA5468, LMA5469 and LMA5470 were amended to the following:

1. Notwithstanding any provision to the contrary within this Policy or any endorsement thereto –

1.1 this Policy does not apply to any loss, damage, liability, claim, fines, penalties, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:

1.1.1 any Cyber Act or Cyber Incident; or

1.1.2 any action taken in controlling, preventing, suppressing or remediating any Cyber Act or Cyber Incident; or

1.1.3 any loss of use or reduction in functionality of Data,

regardless of any other cause or event contributing concurrently or in any other sequence thereto unless subject to the provisions of paragraph 5 [note: subjectivity only appropriate for LMA5469 and LMA5470];

1.2 this Policy excludes any loss, damage, liability, claim, fines, penalties, cost or expense of whatsoever nature for any:

1.2.1 repair, replacement or restoration of Data; [note: deleted ‘reproduction’]

1.2.2 loss or theft of Data; or

1.2.3 amount pertaining to the value of Data.

The exclusions in paragraphs 1.2.1, 1.2.2 and 1.2.3, above, are concerned with Data as property and not circumstances within a broader chain of causation. Note, also, that the word ‘reproduction’ has been intentionally omitted from sub-clause 1.2.1 – the term ‘reproduction’ is problematic because it could apply to a third party that is distributing the Data and this is inconsistent with the other terms in that sub-clause.

The exceptions of LMA5469 and LMA5470

While LMA5468 does not have any exceptions to its exclusions, LMA5469 and LMA5470 do. Specifically,

  • LMA5469 has exceptions for ‘ensuing third party bodily injury’ or ‘ensuing physical damage to or destruction of third party property’ arising from a Cyber Incident; while,
  • LMA5470 has exceptions for ‘ensuing third party bodily injury’ or ‘ensuing physical damage to or destruction of third party property’ arising from a Cyber Incident or Cyber Act.

However, these exceptions may not be effective if the Data exclusions in paragraph 1.2 were enlivened. This is why the ‘Data’ exclusions should be amended, potentially as proposed above.

In determining the scope of the LMA5469 and LMA5470 exceptions, it is important to consider the cover provided by the underlying policy. In Australia, many General Liability (GL) or Public and Product Liability (PPL) policies indemnify the insured for its liability to pay compensation for:

  1. ‘injury’, which may include bodily injury, mental injury, invasion of privacy, defamation and discrimination; and
  2. ‘property damage’, which may include both a) damage to tangible property (including loss of use therefrom) and b) loss of use of tangible property which arises out of damage to other tangible property.

In comparing the exceptions in LMA5469 and LMA5470 with these definitions, it is apparent that:

  1. ‘bodily injury’ in the exceptions of LMA5469 and LMA5470 is narrower than ‘injury’ in many General Liability policies, such that mental injury, invasion of privacy, defamation and discrimination remain excluded; and
  2. ‘damage to or destruction of tangible third party property’ in the exceptions of LMA5469 and LMA5470 is narrower than ‘property damage’ in many General Liability policies since there is no allowance for ‘loss of use’ of property.

Other features of LMA5468, LMA5469 and LMA5470

Other features of LMA5468, LMA5469 and LMA5470 are as follows –

  1. Paragraph 2: a ‘reading down’ clause whereby, if any portion is invalid or unenforceable, the remainder shall apply in full force and effect (or, in the words of the endorsement, ‘the remainder shall remain…’);
  2. Paragraph 3: a ‘primacy clause’ whereby the endorsement supersedes or replaces any other clauses in the policy regarding Cyber Acts, Cyber Incidents or Data. Note, however, that this clause is deleted from LMA5468A, LMA5469A and LMA5470A;
  3. Paragraph 4: reverses the onus of proof such that, if the insurer alleges that the endorsement excludes ‘loss sustained by the Insured’, then the insured has the burden of proving otherwise. Here, it is appropriate to consider:
    1. what would be required for an insurer to ‘allege’ that the exclusion applies? The endorsement is silent on this; and
    2. what justifies reversing the onus of proof? Parties to an insurance contract may specify who bears the onus of proving a particular fact, even if this involves reversing the onus of proof: see Levy v Assicurazione Generali [1940] AC 791. However, reversing the onus of proof is contrary to the interests of insureds and conflicts with the traditional position whereby the insurer must prove that an exclusion applies. Given the resources and expertise of insurance companies, it is difficult to see how reversing the burden of proof could lead to more equitable outcomes.

Separately, it is unusual that paragraph 4 only uses the term ‘loss’ when paragraph 1 uses the terms ‘loss’, ‘damage’, ‘liability’, ‘claim’, ‘fines’, ‘penalties’, ‘cost’ and ‘expense’. While the intention of the clause is almost certainly to exclude all of these, the endorsement itself is not so explicit.

Please note that LMA5468, LMA5469 and LMA5470 have since been replaced by LMA5468A, LMA5469A and LMA5470A. The analysis in this article, however, is relevant to those updated endorsements.

LMA5395: Coronavirus Exclusion for marine and energy liability policies

Posted on by Stephen Tomlinson

Analysis of LMA5395

About LMA5395

Drafted by the Lloyd’s Market Association (LMA) and released in April 2020, LMA5395 is a coronavirus exclusion for use on marine and energy liability policies.

The LMA5395 exclusion: clause 1

Broadly, clause 1 of LMA5395 excludes loss, damage and liability arising from the transmission (actual or alleged) of:

a) COVID-19;

b) SARS-CoV-2; or

c) any mutation of variation of SARS-CoV-2; or

d) any fear or threat of a), b) or c).

By excluding loss, damage and liability arising from the transmission of COVID-19, the drafters of LMA5395 appear to have misunderstood that it is a pathogen which is transmitted, not a disease. Technically, a ‘disease’ is a condition that negatively affects an organism and the condition will only develop after the pathogen has been transmitted. Given that the virus which causes COVID-19, SARS-CoV-2, has been excluded, this misunderstanding may not be material to the exclusion’s operation. But it is preferable that exclusions are consistent with science and, for disease exclusions, epidemiology.

COVID-19, SARS-CoV-2 and ‘variations’?

While many of the LMA clauses released at this time were ‘Communicable Disease’ exclusions, LMA5395 is limited to COVID-19 (i.e. the disease), SARS-CoV-2 (i.e. the virus which causes COVID-19) and ‘any mutation or variation of SARS-CoV-2’. While a mutation can be understood as having derived from SARS-CoV-2, the use of the term ‘variation’ is ambiguous since the term could be applied to other coronaviruses – this may not have been intended by the drafters of LMA5395, but the words are open to interpretation and this construction would not have been possible if the word ‘variation’ had been omitted.

The reason that the word ‘variation’ is significant is that some human coronaviruses continually circulate in the human population, such as human coronavirus OC43 (HCoV-OC43), human coronavirus HKU1 (HCoV-HKU1), human coronavirus 229E (HCoV-229E) and human coronavirus NL63 (HCoV-NL63). The symptoms of these human coronaviruses are generally mild, though others are more lethal –

  • Middle East respiratory syndrome-related coronavirus (MERS-CoV) has been identified as causing 858 deaths from outbreaks in 2012, 2015 and 2018; and
  • severe acute respiratory syndrome coronavirus (SARS-CoV) has been identified as causing 774 deaths between 2002 and 2004.

Regardless of its intention, LMA5395 should be explicit about whether other coronaviruses are within the scope of its exclusion.

The LMA5395 exclusion: clause 2

Clause 2 of LMA5395 states that the exclusion extends to liability and costs to ‘identify, clean up, detoxify, remove, monitor or test for a), b) or c) above’. While this may seem straightforward, there is a distinction between:

  • a pathogen which causes a disease; and,
  • a disease, which is a condition that affects an organism.

Strictly speaking, it would not be possible to ‘clean-up’ or ‘detoxify’ a disease. Furthermore, to ‘remove’ a disease would require the organism to be physically removed from a location. However, ‘monitoring’ or ‘testing’ for a disease is feasible, since this would simply require testing persons (or other organisms) to determine if they have the disease.

Since clause 2 is likely intended to be a clarification of clause 1, the omission of ‘fear or threat’ of a), b) or c) does not appear material. Nonetheless, its omission may create some ambiguity.

The LMA5395 exclusion: clause 3

Clause 3 of LMA5395 excludes liability, loss and costs that arise out of forms of financial loss as a result of ‘any of a), b) or c) above or the fear or the threat thereof’. Clause 3 is therefore best understood as a ‘consequential loss’ exclusion.

Clause paramount

Some LMA clauses contain a ‘primacy clause’ which states that the endorsement shall apply to all extensions, additional coverages, exceptions and other coverage grants. LMA5395 does not, but the opening statement of the endorsements states that ‘this clause shall be paramount and shall override anything contained in this insurance inconsistent therewith’. This statement has an equivalent effect to the primacy clauses of other LMA disease exclusions.

LMA5396: Communicable Disease Exclusion for liability policies

Posted on by Stephen Tomlinson

Analysis of LMA5396

About LMA5396

Drafted by the Lloyd’s Market Association (LMA) and released in April 2020, LMA5396 is a communicable disease exclusion for use on liability policies.

Clause 1: the ‘Communicable Disease’ exclusion

At its broadest, LMA5396 excludes liability and costs ‘in connection with’:

  1. a Communicable Disease; or
  2. the fear or threat of a Communicable Disease.

Because all that is required between the loss and Communicable Disease is a ‘connection’, the Communicable Disease may not need to be a cause of the loss for the exclusion to apply. The breadth of the exclusion is also demonstrated by the anti-concurrent causation phrase ‘regardless of any other cause contributing concurrently or in any sequence’ in clause 1.

Clause 2: clarification of exclusion

Clause 2 of LMA5396 clarifies that the exclusion of clause 1 includes costs to clean-up, detoxify, remove, monitor or test for a Communicable Disease. While this may seem straightforward, there is a distinction between:

  • a pathogen which causes a disease; and,
  • a disease, which is a condition that affects an organism.

Strictly speaking, it would not be possible to ‘clean-up’ or ‘detoxify’ a disease. Furthermore, to ‘remove’ a disease would require the organism to be physically removed from a location. However, ‘monitoring’ or ‘testing’ for a disease is feasible, since this would simply require testing persons (or other organisms) to determine if they have the disease.

Clause 3: definition of ‘Communicable Disease’

In clause 3 of LMA5396, ‘Communicable Disease’ is defined as ‘any disease which can be transmitted… from any organism to another organism’.  Requiring the disease to be transmissible between organisms does qualify the scope of the definition; food poisoning, for example, would not be excluded as a ‘Communicable Disease’ because it is transmitted by the ingestion of contaminated food or water, not by a pathogen that is transmitted between organisms.

Beyond this,

  • sub-clause 3.1 inclusively identifies types of pathogens;
  • sub-clause 3.2 inclusively identifies means of transmission; and,
  • sub-clause 3.3 identifies possible effects of the disease or pathogen.

None of these sub-clauses, however, are essential to the operation of the endorsement.

LMA5399: Communicable Disease Exclusion (Casualty Treaty Reinsurance)

Posted on by Stephen Tomlinson

Analysis of LMA5399

About LMA5399

Drafted by the Lloyd’s Market Association (LMA) and released in May 2020, LMA5399 is a communicable disease exclusion for Casualty (Liability) Treaty Reinsurance.

Clause 1: LMA5399 exclusion

At its broadest, Clause 1 of LMA5399 excludes loss and liability ‘in connection with’:

  • a Communicable Disease; or
  • the fear or threat, whether actual or perceived, of a Communicable Disease.

Because all that is required between the loss/liability and Communicable Disease is a ‘connection’, the Communicable Disease may not have to be a cause of loss for the exclusion to apply. This intended effect of the exclusion is demonstrated by the words ‘regardless of any other cause contributing concurrently or in any sequence’ in clause 1.

Clause 2: definition of ‘Communicable Disease’

In clause 2 of LMA5399, ‘Communicable Disease’ is defined as ‘any disease which can be transmitted… from any organism to another organism’.  Requiring the disease to be transmissible between organisms does qualify the scope of the definition; food poisoning, for example, would not be excluded as a ‘Communicable Disease’ because it is transmitted by the ingestion of contaminated food or water, not by a pathogen that is transmitted between organisms.

Beyond this,

  • sub-clause 2.1 inclusively identifies types of pathogens;
  • sub-clause 2.2 inclusively identifies means of transmission; and,
  • sub-clause 2.3 identifies possible effects of the disease or pathogen.

None of these sub-clauses, however, are essential to the operation of the endorsement.