This question posed in the title of this presentation is easier asked than answered. Max Chester and Tina Matic, Partners at Foley & Lardner led an interesting discussion on this topic, each of them presenting a compelling argument for whether or not Covid-19 should be considered a natural peril. Tina Matic provides attendees with the headliner that their presentation does not reach a specific conclusion, but is intended to demonstrate points for each side. The panel explores the language typically included in these treaties and the possibilities for the intent of that language.
At the onset of the Covid-19 pandemic, governments ordered shutdowns on a worldwide scale. Business interruption losses were at the forefront of insurance industry debates. There has been, and continues to be lawsuits regarding business interruption coverage. The legal arguments raised in US courts point to the lack of any physical damage or physical loss of property caused by Covid-19, and cases have been dismissed on this fact despite different conclusions being reached in other parts of the world.
Max Chester provided a brief rundown of different ways perils are reinsured and where Covid-19 may fall within those categories. Specifically, treaties typically provide lists of examples of covered natural perils. These typically include, but are not limited to, earthquakes, volcanic disruption, hurricane, storm, tornado, windstorm, flood, freeze, snow, avalanche, forest fire—the list goes on and includes several others that are similar to these perils listed. The pro-argument is that a natural peril is something that originates in nature, and that viral outbreaks are a natural occurring event. If a treaty provides that “all” natural perils are covered, Covid-19 could arguably fall into this category, and the lists provided are illustrative, but not exhaustive (“including, but not limited to…”).
However, the intent of the parties is paramount. The opposing viewpoint posits that because a peril such as Covid-19 was intended as an inclusion at the time the contract was written, it should not be covered as a natural peril. This is true even if the treaty covers “all natural perils,” because the listed examples refer to only environmental, geological, or meteorological perils. The legal concept of ejusdem generis—meaning “of the same kind” implies that Covid-19 does not fall into the categories of example perils. Also, natural hazards are different than manmade hazards—such as the difference between an overflowing river versus the failure of a dam. If we consider the origins of Covid-19, there are a few theories. The origin, even now, is unknown and there are conflicting theories on whether or not it was a manmade virus or naturally occurring. The method of outbreak is also something to consider; whether or not it was spread due to a lab leak or spread through human contact with zoonotic diseases.
With cogent arguments for both points of view, whether or not Covid-19 should be considered a natural peril will certainly be a subject to debate for years to come.
