Continued Zika virus warnings may dampen summer sporting events such as the Rio de Janeiro-hosted Summer Olympics in August, as insurers weigh the risk of insuring such events in the midst of another potential global communicable disease outbreak.

The Zika virus is transmitted to people via infected mosquitoes. A press release issued in March by the governor of New Orleans stated that one in five people infected could develop symptoms within three to seven days. The symptoms, which may last up to a week, include fever, rash, joint pain, muscle pain, headache and conjunctivitis. According to global health agencies, the virus can spread through sexual contact and also to unborn babies. More serious effects of the virus include microcephaly in infants and Guillain-Barre syndrome, a severe and progressive neurological disorder.

Zika Treatment Options Limited

Currently, there is no vaccine to prevent the virus and no medicine to treat it. The Centers for Disease Control and Prevention recommends rest, fluids and certain over the counter pain medication.

At least 50 people in the United States have been infected by the virus according to the CDC. The CDC declared that its emergency operations center has been placed on a “Level 1” status – its highest level of activation – as a result of the Zika outbreak. That level of activation has only occurred three times in the past: during the Ebola outbreak in 2014; during the H1N1 pandemic in 2009; and after Hurricane Katrina in 2005.

Recently, Rio’s mayor assured the Olympic Executive Board that the outbreak was under control in the city. Weather conditions are expected to improve the situation, since the onset of the dry season begins in summer there.

But despite preventive measures being taken in Rio and elsewhere, the Zika virus is expected to complicate procuring certain types of insurance, like event coverage.

Dan Burns, president of PFS, a managing general underwriter for companies like Lloyd’s of London and Chubb, explained that there are two types of insurance coverage for events: business interruption and event cancellation.

The Chicago-based company specializes in coverage for professional sport franchises, stadiums, as well professional and amateur athletes.

Both policies offer broad coverage for communicable diseases.

“What clients typically do is they purchase this coverage not knowing what the next outbreak of something is going to be, but they are therefore protected against it,” Burns said.

If the government or a third party deems an event too risky and either cancels it or stages it elsewhere, the policy would come into play.

According to Burns, revenue streams that could be impacted as a result of moving a game or cancelling an event include:

• Ticket sales
• Concessions sales
• Parking fees
• Merchandise sales
• Revenue from signage sponsorships

Both Burns and Royal Oakes, a Los Angeles-based partner with Hinshaw & Culbertson, say Zika specific coverage would be very expensive.

“The bottom line is that the Zika virus is going to make insurance that’s harder to get and the coverage that the policyholder can obtain is going to be more expensive, explained Oakes. That’s because the uncertainty surrounding the illness combined with public health concerns may scare the insurance market.

Coverage disputes that could arise often relate to what the parties knew when they made the deal, said Oakes.

“Oftentimes insurance companies zero in on misrepresentations by policyholders,” Oakes said.

The state of mind of the policyholder can be an issue as well as the state of mind of the insurer, he said. He explained that includes an insurer’s awareness of various types of risk along with common knowledge that results from high publicity of the virus.

“It just gets more complicated to the extent there’s unstated knowledge on the part of either side when you get to a coverage dispute down the road after the policy is issued and there’s a loss,” Oakes explained.

Agents don’t usually get involved in coverage disputes unless there is evidence of misrepresentation or negligence.

There’s a number of defendants that could be targeted in a coverage dispute involving a sporting event, Oakes said, such as stadiums owners, host cities and committees.

Oakes said insurers can mitigate the risk associated with large events by avoiding boilerplate language in policies. Rather, policies should contain specific clauses that address the facts, such as the risks associated with the Zika virus. He said insurers need to be very clear and explicit about what is and what is not covered.

“Many coverage disputes in high profile cases are triggered because the policies are simply not as clear as they should be,” Oakes said.

There’s no need to reinvent the wheel. Past experience in covering large events, such as the Superbowl, World Series, NBA playoffs and the Olympics, will help in crafting special language in the policy, he said.

Zika Battles

In the meantime, agencies around the world are working to combat the spread of Zika.
Last month, the U.S. Agency for International Development launched a campaign “Combating Zika and Future Threats: A Grand Challenge for Development”, calling on innovators around the world to submit groundbreaking ideas in order to respond to the outbreak.

In support of the Global Health Security Agenda, the campaign will invest up to $30 million to enhance prevention, detection and response to mitigate the spread and impact of the virus and to combat future infectious disease outbreaks.

U.S. Representative Vern Buchanan co-sponsored legislation that could allow the use of unspent federal funds for the fight against the virus. The Zika Response and Safety Act (H.R. 4446) would allow government agencies to use an estimated $1.4 billion already appropriated by Congress for Ebola response to combat the Zika virus. Buchanan said Congress should review the matter quickly in order to expand mosquito control programs and speed development of a vaccine.

*This story ran previously in our sister publication Claims Journal.