A business refuses to enforce public health regulations. Is it liable?

Commercial clients who fail to follow local health regulations could be considered a “moral hazard” to insurers, but liability claims under such circumstances during the COVID pandemic will not necessarily be denied, a Toronto commercial broker suggests.

Commercial general liability policies tend to have exclusions for intentional acts. And so, suppose a business intentionally does not strictly enforce wearing masks indoors, and that business gets sued by a plaintiff who alleges they caught COVID-19 on the premises of that business. Would the liability claim be denied?

“Depending on the circumstances, I don’t think the insurer can really prove there was an intent to harm, if we are really talking more about a case of reckless disregard for the safety of others and themselves,” said Harry Grewal, Toronto-based vice president and claims manager at HUB International HKMB Limited. He is not aware of any explicit exclusions in commercial general liability policies for failure to follow local health regulations pertaining to COVID-19.

“I don’t have [a liability claim] yet where somebody says, ‘I was at your restaurant and I contracted the disease.’”

Canadian Underwriter asked Grewal if some insurers have commercial liability exclusions that apply in certain situations when an insured intentionally violates local health orders or regulations.

“This is a moral hazard, but I am not sure [a liability] claim can be defeated,” said Grewal. “Even if an insurer ends up paying a claim, they may say, ‘Gee, these guys are not a very good risk,’ akin to poor housekeeping. When things become piled up, it becomes a fire hazard or, if they don’t follow the rules or if they don’t do what’s prudent, I think it will affect [insured losses] long-term.”

In any case, it would be difficult for a plaintiff to prove they caught COVID-19 at a specific place at a specific time, suggested Grewal.

“If in the last 10 days you had been in 10 places, pinpointing where you contracted it or where you infected others becomes a real can of worms and hard to prove,” said Grewal. “It is left to the science to figure out who caught what, when and from whom. The case load for these claims under a commercial general liability policy has been low. The problem with COVID is, one can be positive and asymptomatic at the same time. So you can spread the disease without knowing it and then it is difficult to prove.”

COVID-19 was declared a pandemic Mar. 11 by the World Health Organization.

To reduce the risk of transmission, Toronto Public Health advises people to keep two metres away from each other, to wear a mask or face covering in indoor public spaces, and to wear a mask when you can’t keep physical distance.

After weeks of increasing daily rates of people testing positive for COVID-19, the Ontario government imposed new restrictions this past Saturday in Toronto, Peel Region and Ottawa. In those three municipalities, indoor dining at restaurants and bars will be prohibited, while gyms, movie theatres and casinos will be closed, The Canadian Press reports. The new measures stay will be in place for at least 28 days.

In Quebec, where the province reported just shy of 900 new cases of COVID-19 Sunday, bars, casinos, reception halls, theatres, libraries and museums will all be closed for a 28-day period, effective Wednesday at midnight. Restaurants will be limited to take-out only but other businesses, such as hair salons and retail stores will be allowed to stay open.