After a restaurant owner finds the dead body of one of his employees in his walk-in cooler, the Health Department orders destruction of all stock and inventory in the cooler, as well as disinfection of the cooler.
A restaurant owner finds the dead body of one of his employees in his walk-in cooler. The death is ruled an overdose. The Health Department orders destruction of all stock and inventory in the cooler, as well as disinfection of the cooler.
Q: The insured has a standard ISO Special Form Property policy. Is there coverage for the loss of stock and inventory? The cost of disinfecting the cooler? Loss of income?
Response 1: There is no property coverage for the stock. The closest fit would be the Spoilage Coverage endorsement (CP 04 40), but that still won't work because it limits contamination coverage to contamination by the refrigerant. And the ordered destruction of the food by a civil authority is excluded. Not much you could have done differently in the ISO world about the loss of the stock.
From a business income standpoint, coverage could have been in place by attaching the Food Contamination (Business Income and Extra Expense) endorsement (CP 15 05), but it may have required a stretch in the wording. The endorsement provides coverage:
- If the business described in the Schedule is ordered closed by the Board of Health or any other governmental authority as a result of the discovery or suspicion of "food contamination"
And "food contamination" is defined as:
an outbreak of food poisoning or food-related illness of one or more persons arising out of:
1) Tainted food you distributed or purchased;
2) Food which has been improperly processed, stored, handled or prepared in the course of your business operations; or
3) Food which has been contaminated by virus or bacteria transmitted through one or more of your employees, including temporary and leased employees.
Since no one ever got sick, there probably isn't coverage. Again, there’s probably nothing you could have done about this.
Response 2: Neither applies. Impaired property is a commercial general liability exclusion. The civil authority exclusion applies unless the order is to prevent the spread of fire. This could be excluded as a discharge or seepage of a pollutant, depending on case law. It may also be excluded with a fungi/bacteria exclusion.
Ultimately, this one might be up to the courts. Turn the claim in and let the company decide. There must be a covered cause of loss to trigger business income coverage.
Response 3: What exclusion would apply? Possibly the pollution exclusion, but whether it does or not depends on case law in your area.
Check out this Big “I” Virtual University (VU) article: “I See Dead People...Are They Covered?”
This question was originally submitted by an agent through the VU’s Ask an Expert service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.
