By Mark DeBofsky

Law360 (April 17, 2020, 5:24 PM EDT )

Mark DeBofsky

The COVID-19 crisis has disrupted our lives, our livelihoods and the national economy. The response to the pandemic has in many respects brought out the best in all of us, but it has also led to widespread confusion about personal insurance benefits.

Some issues have been resolved, while other issues are certain to arise, as will be discussed below.    

Disability Insurance

For those who have contracted coronavirus and become debilitated due to its symptoms, disability insurance should cover losses in earnings during any period of illness and ensuing recovery. But what about those who were merely exposed and quarantined? They are undoubtedly unable to work due to the virus, but would they qualify for disability insurance payments? 

One of the leading cases on this issue is Dang v. Northwestern Mutual Life Insurance Co.,[1] which involved a physician who was a carrier of hepatitis B. He applied for disability benefits because he was barred from performing certain surgical procedures on account of the risk to his patients unless he was able to secure their informed consent.

The benefit claim was unsuccessful because the insurer maintained he was legally disabled, i.e., unable to work due to a legal restriction, rather than physically incapacitated. In 1997, the U.S. District Court for the District of Nebraska agreed and upheld the claim denial. 

Dang relied on an older 1934 decision from the New York Supreme Court's Appellate Division, Gates v. Prudential Insurance Co.,[2] which involved a dairy farmer who was quarantined after he was found to be a typhoid carrier.

The court asked: "Can it be said that, when this policy was written, the parties had in mind that a typhoid carrier, affected in no other manner, was physically disabled?"[3] The court answered its own question in the negative because the dairy farmer was physically and mentally able to work but was only barred from doing so because state law mandated him to be quarantined.

However, the U.S. Court of Appeals for the Sixth Circuit reached the opposite conclusion in 2000 in Doe v. Great-West Life & Annuity Insurance Co.,[4] which involved a dentist infected with hepatitis. He was physically capable and legally allowed to practice dentistry, but only if he obtained informed consent from his patients, which the court acknowledged was unlikely. The court thus concluded:

The policy does not distinguish between an inability to perform based on "physical" factors (a loss of digital dexterity, e.g.) and "social" factors such as the duty to refrain from performing dental procedures when the patient has not given informed consent. The Dang court chose to draw such a distinction, but we do not read the language of the Great-West policy as permitting us to follow suit.[5]

Another, but related aspect of this issue is the question of whether the risk of exposure based on an underlying condition requires as a matter of common care and prudence avoidance of the workplace. This issue most frequently arises in situations involving individuals with cardiac conditions who receive medical advice to avoid highly stressful workplaces,[6] or health care workers with drug addiction problems who need to avoid being in a situation where narcotics are frequently dispensed and may potentially be misused.[7] 

The Centers for Disease Control and Prevention has identified a number of conditions that increase the risk of a severe outcome from coronavirus, such as lung disease or moderate to severe asthma, heart disease, people who are immunocompromised or who have diabetes, along with other conditions.[8] Such individuals may need to remain sheltered at home until the COVID-19 risk subsides.

Due to the risk such individuals face, they may be eligible to receive disability benefits while sheltering in place, although such claims may be controversial. Based on the disparity of the court rulings on these issues, it is likely the disposition of such claims will be determined on a case-by-case basis. 

Accidental Death and Life Insurance

Is it possible to recover accidental death benefits as a result of exposure to COVID-19 since death from the virus is sudden, unexpected and unintended? The answer is that death due to coronavirus exposure would almost certainly not be compensable under an accidental death insurance policy. 

In addition to the difficulty of proving that the disease was accidentally contracted in a specific location such as place of work or a place of business visited by the decedent, or even by a health care worker who contracts the illness while caring for sick patients, death due to disease is generally excluded by accidental death insurance policies. 

The leading case on this issue is Chase v. Business Men's Assurance Co.,[9] which involved an accidental death claim brought by the beneficiary of a decedent who contracted typhoid fever as a result of drinking contaminated water that was thought to be clean and fit for drinking.

The U.S. Court of Appeals for the Tenth Circuit, in 1931, framed the question as "whether the death of the insured, caused by typhoid fever contracted by drinking water contaminated with typhoid bacilli without his knowledge of such contamination, resulted 'from bodily injuries effected solely through accidental means,' rather than from disease."[10]

In answering that question, the court acknowledged it is often difficult to distinguish between a bodily injury and a bodily disease. It is also generally understood, though, that if an accidental injury causes a fatal illness, courts will generally find the death to have been the result of accidental means. 

However, the court determined the plain language of the policy "does not cover death resulting from typhoid fever not caused or brought about by accidental bodily injuries, unless it was intended that the word 'disease' should not include infectious and contagious diseases."[11] Since that was not the case, the court ruled for the insurer. 

If external trauma predisposes someone to catching coronavirus, though, there may be a different outcome, although death due to natural causes as well as death occurring in the course of medical treatment would be excluded from coverage for accidental death insurance benefits.

For example, in Key Life Insurance Co. v. Gulledge in 1968,[12] which involved a death from cardiac arrest that occurred while the decedent was undergoing surgery to treat an accidental injury, the Arkansas Supreme Court determined:

An accidental injury may be found to have been the cause of death within the meaning of a policy like this one if it set in motion the chain of events that resulted in the insured's death, even though some other condition may also have contributed to the final outcome.

In Brown v. State Mutual Life Insurance Company of America, the Louisiana Court of Appeal also found that an accidental death occurred "directly and independently of any other cause" in a case where the insured suffered a foot puncture injury that became infected, then gangrenous, and ultimately led to the insured's death.[13] There, the court further remarked,

We accept the rule on this question to be that if the traumatic event is the predominant cause of the loss (death in this case) the exclusion [precluding coverage for death caused by disease, natural causes, or medical or surgical treatment] does not apply. Even if an injury aggravates an existing illness or disease, accelerating death, the death is regarded as resulting directly and independently of all other causes.[14]

Thus, if someone is hospitalized for a broken leg resulting from a fall and contracts the virus while in the hospital and subsequently dies, the accident that set off the chain of causation may trigger coverage under an accidental death policy.

Relatedly, health care workers and first responders who contract the illness at work would likely be able to recover workers' compensation benefits.[15] 

For those who believe they have contracted COVID-19 while visiting the home of a friend of family member, most homeowners' insurance policies exclude coverage for transmission of communicable diseases even if a visitor could establish the virus was contracted in someone's home.

Finally, while the fight against the coronavirus has been framed in terms of war, it is doubtful that life insurers would be able to invoke a policy's war exclusion to avoid paying a life insurance claim for a victim of the novel coronavirus unless it is somehow proven that the pandemic was a result of bioterrorism or biological warfare, a highly dubious proposition.         

Conclusion   

These are uncertain times. And with uncertainty, it is inevitable that insurance issues will arise that present questions with no clear-cut answers. However, there are guideposts from earlier times that will be helpful in navigating complex insurance claims.

While shelter-in-place orders will themselves not suffice to create viable disability claims, being infectious albeit asymptomatic will likely lead to entitlement to disability benefits.

Likewise, those who already have conditions that render them more vulnerable to a severe case of COVID-19 will also likely have viable disability claims, especially if they work in jobs that place them in greater contact with large numbers of people. With respect to accidental death insurance, though, recovery is likely precluded without more than mere exposure to the novel coronavirus. 

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Mark DeBofsky is a shareholder at DeBofsky Sherman Casciari Reynolds PC.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 960 F.Supp. 215 (D. Neb. 1997);

[2] 240 A.D. 444, 270 N.Y.S. 282 (N.Y. App. 1934)

[3] Id. at 285

[4] 2000 U.S.App.LEXIS 3673 (6th Cir. 2000) (unpublished)

[5] 2000 U.S. App. LEXIS 3673, at *12

[6] See, e.g., Lasser v. Reliance Standard Life Insur. Co. , 344 F.3d 381 (3d Cir. 2003)

[7] Colby v. Union Security Ins.Co. , 705 F.3d 58 (1st Cir. 2013)

[8] "Groups at Higher Risk for Severe Illness," available at https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/people-with-medical-conditions.html. 

[9] 51 F.2d 34 (10th Cir. 1931)

[10] 51 F.2d at 35-36

[11] 51 F.2d at 36

[12] 245 Ark. 74, 76, 431 S.W.2d 245, 246 (1968)

[13] Brown v. State Mut. Life Ins. Co. of Am. , 377 So. 2d 355, 363 (La. Ct. App. 1979)

[14] Id.

[15] See, e.g., Ade v. State of Ill. , 13 Ill.Ct.Cl. 1 (1943) (holding that contracting typhoid illness at work is compensable under state workers' compensation law); Connelly v. Hunt Furniture Co., 240 N.Y. 83 (Ct. App. N.Y. 1925) (finding that funeral worker who contracted gangrene from a corpse was entitled to workers' compensation); See also, Law360 - MTA To Pay Death Benefits For COVID-19 Transit Victims.

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