LMA5397: Communicable Disease Exclusion for power generation, construction and engineering policies

August 2, 2020 by Stephen Tomlinson

Analysis of LMA5397

About LMA5397

Drafted by the Lloyd’s Market Association (LMA) and released in April 2020, LMA5397 is a communicable disease exclusion for use on power generation, construction and engineering policies.

Clause 1: the ‘Communicable Disease’ exclusion

At its broadest, LMA5397 excludes loss ‘in connection with’:

a Communicable Disease; or
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 loss for the exclusion to apply. The breadth of the exclusion is further demonstrated by the words ‘regardless of any other cause contributing concurrently or in any other sequence thereto’ in clause 1.

In clause 2 of LMA5397, ‘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.

LMA5398: Infectious or Contagious Disease Exclusion

August 2, 2020 by Stephen Tomlinson

Analysis of LMA5398

About LMA5398

Drafted by the Lloyd’s Market Association (LMA) and released in May 2020, LMA5398 is a communicable disease exclusion for UK consumer and commercial property risks.

LMA5398 exclusion

LMA5398 excludes loss or damage that is ‘in any way caused by or resulting from’:

infectious or contagious disease;
any feat or threat of infectious or contagious disease; or
any action taken to minimise or prevent the impact of an infectious or contagious disease.

Significantly, the words ‘in any way caused by or result from’ have the effect that the exclusion only applies where the listed items are an actual cause of loss, whether the proximate or remote cause.

Definition of ‘infectious or contagious disease’

The second sentence of LMA5398 defines ‘infectious or contagious disease’ as any disease capable of being transmitted from an organism to another organism. Strictly speaking, however, it is pathogens which are transmitted between organisms and pathogens which cause diseases (since the disease is the condition that affects the organism).

LMA5500: Infectious or Contagious Disease Exclusion during a PHEIC

August 2, 2020 by Stephen Tomlinson

Analysis of LMA5500

About LMA5500

Drafted by the Lloyd’s Market Association (LMA) for use on consumer and commercial Accident/Accident & Illness policies, LMA5500 is an infectious or contagious disease exclusion which is triggered by a Public Health Emergency Of International Concern (PHEIC).

LMA5500: the exclusion

Clause 1 of LMA5500 excludes claims that result from an outbreak of an ‘infectious or contagious disease’ that has been declared a PHEIC by the World Health Organization (WHO).

What is a PHEIC?

Under the International Health Regulations (2005), a Public Health Emergency Of International Concern (PHEIC) is defined as “an extraordinary event which is determined to constitute a public health risk to other States through the international spread of disease and to potentially require a coordinated international response”. This definition implies a situation that is:

serious, sudden, unusual or unexpected;
carries implications for public health beyond the affected State’s national border; and
may require immediate international action.

To date, there have been six PHEIC declarations:

the 2009 swine flu declaration;
the 2014 polio declaration;
the 2014 Ebola declaration;
the 2016 Zika virus declaration;
the 2019 Kivu Ebola declaration; and,
the 2020 COVID-19 declaration.

LMA5500 is therefore only likely to exclude particularly serious diseases.

LMA5500: Clauses 2 and 3

Clause 2 of LMA5500 states that the exclusion of Clause 1 shall apply to claims made:

after the date of the PHEIC declaration; and,
where the disease has been diagnosed by a qualified medical practitioner prior to such declaration.

Clause 3 states that the exclusion shall apply until the WHO ‘cancels or withdraws any relevant PHEIC’. These words are not entirely accurate since the WHO cannot cancel or withdraw a PHEIC, but the WHO can declare that a PHEIC no longer exists. For an example of such a declaration, see Fifth meeting of the Emergency Committee under the International Health Regulations (2005) regarding microcephaly, other neurological disorders and Zika virus.

LMA5500: definition of ‘infectious or contagious disease’

In Clause 4, LMA5500 defines ‘infectious or contagious disease’ as ‘any disease capable of being transmitted from an infected person, animal or species to another person, animal or species by any means’. Strictly speaking, however, it is pathogens which are transmitted between organisms and pathogens which cause diseases (since the disease is the condition that affects the organism).

LMA5501: Political Risk Communicable Disease Exclusion

August 2, 2020 by Stephen Tomlinson

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.

LMA5502 and LMA5503: Communicable Disease (Property Treaty Reinsurance)

August 2, 2020 by Stephen Tomlinson

LMA5502 and LMA5503 Analysis

About LMA5502 and LMA5503

Drafted by the Lloyd’s Market Association (LMA) and released in May 2020, LMA5502 and LMA5503 are limited communicable disease exclusions for Property Treaty Reinsurance.

Clause 1: the exclusion

At its broadest, Clause 1 of LMA5502 and LMA5503 exclude damage and loss ‘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 damage/loss and Communicable Disease is a ‘connection’, the Communicable Disease may not have to be a cause of the damage/loss for the exclusion to apply. This intended breadth of the exclusion is further demonstrated by the words ‘regardless of any other cause contributing concurrently or in any sequence thereto’ in clause 1.

Clause 2: exception to the exclusion

Clause 2 of LMA5502 provides an exception to the exclusion of clause 1 such that the reinsurance agreement will cover:

physical damage to property insured; and,
business interruption (‘Time Element Loss’)

that arise from the listed perils, i.e. fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, earthquake, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire and forest fire.

LMA5503 preferable to LMA5502 for insureds

The exception for LMA5503, however, extends to the following additional perils: riot, riot attending a strike, civil commotion, vandalism and malicious mischief. As such, LMA5503 is preferred to LMA5502 from an insured’s perspective.

Clause 3: definition of ‘Communicable Disease’

In clause 3 of LMA5502 and LMA5503, ‘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.

Clause 4: definition of ‘Time Element Loss’

Finally, clause 4 of LMA5502 and LMA5503 define ‘Time Element Loss’ as business interruption, contingent business interruption or any other consequential losses.

JC2020-011 and JC2020-012 Communicable Disease Exclusions

July 26, 2020 by Stephen Tomlinson

Analysis of JC2020-011 and JC2020-012

About JC2020-011 and JC2020-012

Released in April 2020 by the Joint Cargo Committee (JCC), JC2020-011 and JC2020-012 are Communicable Disease Exclusions that have been drafted for Marine Cargo policies.

Clause 1: the Communicable Disease Exclusion

Broadly, clause 1 of JC2020-011 and JC2020-012 exclude loss, damage or liability that has a connection with:

a ‘Communicable Disease’; or
the fear or threat of a ‘Communicable Disease’.

Causation not required for exclusion to apply; connection only

For the exclusion in Clause 1, the words ’caused by’, ‘contributed to by’, ‘resulting from’, ‘arising out of’ and ‘in connection with’ are used. Of these, ‘in connection with’ is the broadest since it may not require a causal relationship between the Communicable Disease and the loss, damage or liability for the exclusion to apply.

Clause 1 of JC2020-011 and JC2020-012 also states that the exclusion shall apply ‘regardless of any other cause or event contributing concurrently or in any other sequence thereto’. Even if a circumstance other than Communicable Disease was proximate cause of the loss, damage or liability, the exclusion will apply if there is a ‘connection’ with Communicable Disease.

JC2020-012: sub-limited exception

Unlike JC2020-011, JC2020-012 has an exception whereby the exclusion of Clause 1 does not apply to ‘charges that would otherwise be recoverable this insurance… to complete a marine transit insured hereunder’. Cover for these charges is to be subject to sub-limits that are specified in JC2020-012. As such, separate sub-limits can be specified for:

each and every loss, or series of losses, arising out of one event; and,
an annual aggregate.

If sub-limits for such charges are specified elsewhere in the underlying policy, then no sub-limits need to be entered in JC2020-012. In such cases, it would be preferable if the sub-limits provision in JC2020-012 was deleted.

Clause 2: definition of ‘Communicable Disease’

In JC2020-011 and JC2020-012, ‘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 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 forms of disease (i.e. bodily injury, illness, damage to human health, human welfare or property).

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

JR2020-016 Communicable Disease Endorsement

July 26, 2020 by Stephen Tomlinson

JR2020-016 Analysis

About JR2020-016

Drafted by the Joint Rig Committee and released in April 2020, the JRC Communicable Disease Endorsement JR2020-016 is intended to be applied to energy policies.

Clause 1: the Communicable Disease Exclusion

Broadly, Clause 1 of JR2020-016 excludes loss, damage or liability that is caused by:

a ‘Communicable Disease’; or
the fear or threat of a ‘Communicable Disease’.

JR2020-016 preferred to LMA exclusions

Because JR2020-016 requires the Communicable Disease to be the proximate cause of loss for the exclusion to apply, JR2020-016 should be preferred by insureds to some of the LMA Communicable Disease exclusions which only require the loss or damage to have ‘a connection with’, to ‘arise out of’ or to occur ‘concurrently’ with a Communicable Disease.

Clause 2: clarification

Clause 2 of JR2020-016 clarifies that the exclusion in Clause 1 excludes costs to clean-up, detoxify, remove, monitor or test for a Communicable Disease or property insured that is affected by such 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.

For consistency with clause 1, it would be preferable if clause 2 also referred to the ‘fear or threat (whether actual or perceived) of a Communicable Disease’. Given the breadth of clause 1, however, such an amendment does not appear strictly necessary.

Clause 3: Definition of Communicable Disease

In JR2020-016, ‘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 because it is transmitted by the ingestion of contaminated food or water, not between organisms .

Beyond this,

sub-clause 3.1 inclusively identifies types of pathogens; and,
sub-clause 3.2 inclusively identifies means of transmission.

Neither sub-clause is essential to the operation of the endorsement.

Clause 4: ‘primacy’ clause

Clause 4 of JR2020-016 is a primacy clause which states that the endorsement shall apply to extensions, additional coverages, exceptions and other coverage grants.

LMA5399: Communicable Disease Exclusion (Casualty Treaty Reinsurance)

July 25, 2020 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.