And, because the business has to be closed for seventy-two hours to wait for the test results, will business income respond? What if the tests are positive and the business must be closed for a longer period of time?

Pennsylvania Subscriber

A

Your question is obviously a matter of concern for all. In answering, therefore, we will broaden the scope of the original question to look at the different ways various insurance forms might be impacted. Although this bioterrorism might be thought of as war, the Webster's Collegiate Dictionary definition of war is ”a state of usu. open and declared armed hostile conflict between states,” which appears to put the question outside that standard policy exclusion. We are waging a war against terrorism and its enablers, which is not the same thing.

·Workers Compensation:

Workers compensation coverage applies to: 1) bodily injury, including resulting death, that is caused by an accident, or 2) disease caused by or aggravated by conditions of employment. In the situation you describe, there is as yet no bodily injury or disease; the testing is for preventive purposes.

That is not to say that preventive testing is not covered. For one thing, state law may require it. For another, insurers may pay the costs of testing as a way of loss control; that is, setting the smaller payment against the larger payment that will certainly be due if the anthrax bacteria is found to be present.

A recent release by the Ohio Bureau of Workers' Compensation indicates that states are addressing this issue. Normally, if no anthrax was medically determined, a claim would ultimately be denied. But under the new Ohio policy testing will be paid.

Of course, if the testing determined that the mysterious substance to which the employees were exposed was indeed anthrax then workers compensation would pay the cost of the antibiotics.

To take this further, suppose the employees alleged mental injury arising out of the potentially hazardous situation. Coverage may vary by jurisdiction. For example, courts in Illinois, Mississippi and Texas have determined mental injury caused by mental stress is compensable, while courts in Kansas, Wyoming, Ohio and Wisconsin have denied workers compensation based on alleged mental injuries without accompanying physical manifestation.

·Employers Liability:

This coverage applies to bodily injury caused by an accident, or to disease. The insurer pays the sums the insured employer is legally obligated to pay as damages because of bodily injury to employees. If workers compensation does not pay for the costs to test the employees, they may decide to sue the employer.

But again, the coverage responds to actual bodily injury or disease, not to possible exposure to disease. However, if an employee actually contracted the disease and sued the employer for negligence, the employers liability insurer would owe a defense at the very least, because the disease was contracted in the course of employment.

·CGL Form:

The CGL form would not be a source of recovery for the employees. The CGL form responds to bodily injury or property damage—both defined terms. Bodily injury is “bodily injury, sickness or disease…including death resulting from any of these at any time.” Preventive testing would not fall within the definition. If by some chance preventive testing was held to be within the scope of bodily injury then certain exclusions come into play. These same exclusions would also apply if the tests on the substance proved the existence of anthrax. Exclusion d. eliminates coverage for any obligation of the named insured under a workers compensation law. Exclusion e. eliminates coverage for bodily injury to an employee of the insured arising out of and in the course of employment by the insured.

Exclusion e. also applies to third party over suits; for example, if an ill employee sued the container manufacturer, who in turned sued the employer for negligence in training employees in the correct process of opening containers.

These exclusions direct these situations to the policies intended to deal with the exposure.

There would be no coverage under coverage C medical payments. Exclusion 2.a. eliminates coverage for expenses for bodily injury to any insured.

However, if a visitor were on the premises when the employees opened the container, and alleged bodily injury resulting from employee negligence in opening the container, the CGL would at the very least owe a defense. Although some might argue that the spores are contaminants, and therefore liability coverage is limited, this is not the case.

Anthrax spores do not fill the scope of the definition of pollutants—smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Anthrax is caused by a spore-forming bacterium, bacillus anthracis, which would appear to take it out of the pollutant category and place it squarely in the animal category. The sterilization method used in Washington—chlorine dioxide gas—also gets rid of rats, mice, and roaches, so clearly the organism is not an industrial by-product as are the items included in the definition.

·Health Insurance:

Some health insurers have announced they will cover the costs of testing for possible exposure to anthrax. Not all employees have health insurance benefits, however.

·Business Income:

Standard business income coverage, such as that on ISO forms, is triggered by direct physical loss of or damage to property, including personal property, at the described premises. If the powder from the container does no damage to covered property then there is no trigger. We should also consider action of civil authority as a possible trigger. The insured premises was closed while HAZMAT specialists removed samples for testing. Here again, this coverage responds to action of civil authority prohibiting access to covered premises because of direct physical loss to property other than at the described premises. So, for example, businesses with business income coverage located near the World Trade Center could call upon this additional coverage because there was covered direct physical damage and civil authority prohibited access to the area. (Policy wording varies and forms must be carefully checked when making coverage determinations.)

But absent direct physical damage, as in the powder scenario, there is no business income coverage.

·Vandalism

The question arises as to the outcome if the white powder were determined to be a hoax. If it were considered vandalism, the cleanup and loss of business income would be covered.

Webster's Collegiate Dictionary (Tenth Edition) defines vandalism as “willful or malicious destruction or defacement of public or private property. The property in question was not destroyed, but was it defaced? To deface is (Webster's again) “1: to mar the external appearance of; injure by effacing significant details… 2: impair.” Mar and efface have as synonyms destroy, which suggests that defacement has a permanent nature. That is not the case with something so easily cleaned up.

Here again, therefore, there is no coverage.