Communicable Disease Exclusion (LMA5391 et seq.)
The communicable disease exclusion removes damage and business interruption connected with communicable diseases from property and business interruption cover, and was significantly developed further in response to COVID-19.
- Clause type
- Exclusion
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Insurer
- Negotiability
- Market standard
Standard wordings
- LMA5391 Coronavirus Exclusion
- LMA5393/LMA5394 Communicable Disease Exclusion
Purpose
Property and business interruption policies are traditionally designed around physical damage and were not intended to carry the systemic, barely diversifiable accumulation risk of a pandemic. Following the significant coverage disputes surrounding COVID-19, insurers tightened and standardised the communicable disease exclusion to consistently remove communicable diseases from base cover.
Effect and limits
LMA5391, published in March 2020, excludes claims in any way caused by or resulting from COVID-19, the SARS-CoV-2 virus, mutations or variations of it, or the fear or threat thereof. As a comparatively narrow drafting, it only bites where these causes are an adequate proximate cause of the loss. More developed clauses such as LMA5393/LMA5394 are drafted as absolute exclusions that also catch indirect and concurrent causes, and are therefore considerably broader than a pure causation clause. Some insurers now offer selective write-backs to ensure that damage from other insured perils such as fire or explosion remains covered even where a pandemic-related factor is also present.
Negotiation and practice
When reviewing a policy, the key question is whether a narrow causation clause or an absolute exclusion is used, and whether a write-back for otherwise insured property perils is included. Businesses with high pandemic exposure should consider whether a standalone epidemic policy or a specific business interruption extension for infectious disease should be purchased to complement the base cover.