February 2007 Avian Flu – Latest insurance and risk update
Humans can catch Avian Flu, but only fromclose proximity and handling of birds. It isdeadly, with >50% mortality worldwide. It is abig threat to poultry, although factory farmsare well-protected, and a BSE style spread ofthe disease is unlikely. The outbreak in Suffolkmay imply there is greater incidence of H5N1in the wild than previously thought, andpeople in contact with birds should take extracare.
Currently H5N1 is not in itself a businessthreat except to the poultry industry. UKbusinesses in the poultry industry should takeit very seriously if they are not already doing
Following the outbreak of H5N1 in the UK,
so. In Marsh’s experience of this sector there
this Adviser outlines the risks and insurance
are already very high standards of hygiene andsafety, and businesses have already planned
implications for British businesses arising from Avian Flu and a subsequent human
Pandemic flu arising from a mutation of H5N1
pandemic.
would be less deadly than Avian Flu, but couldlead to 50% absence from work at the peak,
Business continuity management – wildlife and
and therefore is a major business threat. The
poultry issues
outbreak in Suffolk makes this no more likelyto happen. The required mutation is more
The outbreak of H5N1 poses a major threat to the UK’s
likely to occur in parts of the world where
poultry sector. While steps are being taken to isolate the
people live in close proximity to livestock, and
outbreak, organisations in this sector must continue to
The time to be really concerned is when a
Organisations that deal with birds (or other livestock in
mutation is reported that allows the virus to be
close proximity to poultry) must have emergency
response plans in place to identify any outbreaks and to
point it may be only a matter of weeks before it
put in place any necessary isolation and control
jumps continents - and is likely to lead to
measures to ensure the safety of staff and minimise the
immediate extensive restrictions on travel, and
possibly the passage of some goods. This is areal threat and businesses should take
Marsh also recommends that such organisations need
to think beyond these immediate responses, and haveplans in place that minimise the impact on theirbusinesses and other businesses in their supply chains. These plans might include a controlled shut down ofthe business for a period. Business continuity management – human mutation Insurance implications
H5N1 is still a form of Avian Flu which has not mutated
The outbreak of the H5N1 strain of Avian Flu in the UK
into human form. While there have been cases of
and possible human mutation of the virus will
human infection, at this point human-to-human spread
undoubtedly have an impact on businesses’ insurance
is not proven, but we believe it is prudent to prepare for
programmes, regardless of size or sector.
Below is an outline of the main types of insurance, the
While many firms in the UK have business continuity
potential impact of an outbreak on coverage and
plans to deal with a wide range of potential disruptions,
they may not be adequately prepared for a pandemic,such as that associated with the possible human-to-
Employers’ Liability
human spread of a potential mutation of the current
Employers’ Liability policies for £5m for each
occurrence are compulsory for the vast majority of UKbusinesses and should not contain any exclusion or
A human pandemic could escalate quickly, last for
limitation, at least for this amount, that will prevent a
many months, and infect 25 percent or more of the
claim from an infected employee being dealt with
world’s population, according to public health experts.
Many organisations believe that at the peak of apandemic, up to 50% of the workforce may be absent
Should it become necessary, this type of policy would
from work. To address this risk, firms may need to
respond to employee claims for Avian Flu in the same
examine and amend their existing business continuity
way as any other infectious disease, provided legal
liability is established, for bodily injury, death, diseaseor illness sustained by an employee within the
Marsh recommends that management should review
territorial limits of the policy and caused during the
their firm’s risk management controls, human resource
period of insurance. No exclusions are permitted by law
policies, and communications capabilities, and update
for the first £5m of each occurrence.
them based on the threat of a pandemic, as such anevent could mean having fewer people, losing certain
Public and Products Liability
critical functions, or having staff work from home or
The Public and Products Liability policy provides
coverage against liability for injury, material damage orlimited financial losses of third parties that result from
The main thrust of pandemic preparedness planning
the acts or neglect of the insured. This type of policy is
for businesses should be to reduce the peaks of
held by almost all businesses and insurers are not,
absenteeism. The key points for businesses to consider
currently, imposing any specific Avian Flu exclusions.
However, for both Employers' and Public/Products
Liability, these policies will only respond where there isa legal liability on the part of the insured, subject to the
other policy terms. Where a business is directly
Decontamination, cleaning and hygiene procedures
involved in the handling, processing or transport of anybird stocks, the ability to establish that such a liability
Tamiflu or similar ‘prophylactic’ stockpiles
exists becomes more likely, and the implementation of
reasonable risk control measures to protect employeesor others will be critical to the defence of any such
Possible moth-balling plans for non-essential
Environmental Impairment Liability (EIL) Coverage
Some insureds may also have separate and distinctcoverage, under an EIL policy, for injury or damage
In addition, businesses need to assess how a pandemic
arising out of pollution or contamination. These policies
might affect services from suppliers and vendors, both
may contain restrictive provisions that will be invoked
domestically and overseas - in particular, in areas
by insurers in response to claims for property damage
where incidence of the disease may be concentrated.
or injury arising out of contamination by viruses. Property Insurance Cancellation and Abandonment
The risk of interruption to the business is obvious if
Policies placed before the Avian Flu risk was deemed to
circumstances prevent employees getting to work
be a threat will not have an Avian Flu exclusion. This
through media advice “not to travel into particular
means that any claims due to events cancelled as a
affected area” or to “stay at home” or due to disruption
result of Avian Flu will be paid, providing that the
cancellation of the event is deemed necessary andbeyond the control of the Insured.
There could also be a more direct affect due to anincident occurring at or near the vicinity of the
In practice this means that Avian Flu must make it
insured’s premises, thereby causing either absences
impossible for the event organiser to continue staging
through fear (of employees) or loss of attraction (of
the event. Examples of this include the conference
customers) or even the physical intervention of a
centre/venue being closed due to Avian Flu, and
competent local/civil authority ordering closure of
movement or travel being prohibited or severely
restricted within the area where the event is being held.
There may also be costs incurred in “cleaning” an
Cancellation and abandonment policies do not cover
affected area of the premises of some organism that
claims as a result of disinclination or reduced
attendance. However, advice given by the World HealthOrganisation not to travel to a certain country or area
So how might a Property Damage and Business
has been deemed to be a valid trigger for necessary
cancellation. Where applicable, insurers will want theInsured to reschedule the shows to a later date rather
1. A standard Business Interruption trigger requires
than cancel. This is in some cases proving difficult due
that interruption to the business must be caused by
to the uncertainty of when the Avian Flu risk will be
damage (often described in policy triggers as
“physical damage”) to property (used by theInsured) at the insured’s premises. 2. In respect of any actual incident or discovery of
organism on the premises, insurers would arguethat the presence of avian flu on the premises doesnot constitute “physical damage” (or even “damage”)to property under the policy.
The obvious focus for consideration of any valid coverfor business interruption is the general availability inthe UK marketplace of an extension of cover for“Infectious Diseases”. This is an extension wording thatgrants cover typically for three-month Indemnity Periodand for sub-limits in the range of £0.5m to £5m. However cover under this extension is more likely thannot to be compromised by commonly imposed insurerrestrictions limiting cover to an incident on theinsured's premises only and/or to it being an event thatmust be notifiable by order to a competent authority. It is not currently the case that an outbreak of a humanstrain of Avian Flu is notifiable. More information For further information on how Marsh is advising clients on the risk implications arising from Avian Flu, please contact your client executive.
The information contained in this publication provides only a general overview of subjects covered, is not
Copyright 2007 Marsh Ltd All rights reserved
intended to be taken as advice regarding any individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisors regarding specific coverage issues.
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