Analysis of LMA5501

About LMA5501

Drafted by the Lloyd’s Market Association (LMA) and released in May 2020, LMA5501 is a Communicable Disease exclusion for political risk insurance. Generally, political risk insurance is used to cover infrastructure developers, importers, exporters and other companies against financial loss resulting from political instability.

LMA5501 exclusion

At LMA5501 excludes loss arising out of any action taken by a government in:

• controlling, preventing, suppressing; or
• in any relating to

any actual or suspected ‘Communicable Disease’.

While ‘government’ is not defined in the exclusion, LMA5501 states that that term is to take its definition from the policy.

Definition of ‘Communicable Disease’

In LMA5501, ‘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 i inclusively identifies types of pathogens;
• sub-clause 2 ii inclusively identifies means of transmission; and,
• sub-clause 2 iii identifies possible effects of the disease or pathogen.

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