COVID-19: Policyholders—Watch for "Falling Objects"
May 29, 2020
Falling COVID-19 viral particles are not alive. They are objects that remain stable and transmittable in aerosols for up to three hours and on surfaces on which they have fallen for hours, indeed for days. See, e.g., National Institutes of Health: New coronavirus stable for hours on surfaces.
As "falling objects," viral particles should be included in Covered Causes of Loss property and business income insurance policies which, unlike All Risks policies, require damage or loss resulting from "Specified Causes of Loss." Typically, the definition of "Specified Causes of Loss" reads:
"Specified Causes of Loss" means fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; "Sinkhole Collapse"; "Volcanic Action"; falling objects; weight of snow, ice or sleet, water damage, "Sprinkler Leakage"; "Theft"; or "Building Glass" breakage. (Emphasis added.)
Defining "Falling Objects"
The plain meaning and a layman's understanding of "falling objects" should instruct on the meaning of insurance policy terms that are not otherwise defined in the policy. In addition, insurance policies are broadly construed in favor of the policyholder and for coverage when an insurer could have further defined a term like "falling objects," but chose not to do so. This is especially key when other terms used in the same definition are defined, as is the case for some "Specified Causes of Loss," like "Sinkhole Collapse" or "Theft."
With the "falling objects" part of the "Specified Causes of Loss" definition met, policyholders can also avoid application of certain virus exclusions often included with this type of property coverage. If, for example, a policy's virus exclusion precludes loss from "the presence, growth, proliferation, spread or any activity of . . . virus," but qualifies that "if direct physical loss or direct physical damage to Covered Property by a 'Specified Cause of Loss' results, we will pay for the resulting loss or damage caused by that 'Specified Cause of Loss,'" the bolded sentence opens the door to "falling object" losses even if the object is a viral particle.
Moreover, when property policies that require loss from "Specified Causes of Loss" include an exception to their virus exclusion under a "'Fungus,' Wet Rot, Dry Rot, Bacterial and Virus – Limited Coverage" grant, which is also often the case, there is coverage if "the virus is the result of one or more of the following causes . . . [a] 'specified cause of loss' other than fire or lighting." Policies with this additional coverage also contemplate coverage for business income losses for scheduled premises due to the necessary interruption of business operations resulting from "specified causes of loss," the falling viral particles.
In sum, with COVID-19 viral particles included as "falling objects" within the definition of "Specified Causes of Loss," policyholders have one less obstacle to overcome on the path to property and business income recovery.