In 2017, The Hartford made the following statement to the Securities and Exchange Commission: "Our businesses also have exposure to globally or naturally-occurring pandemics caused by highly infectious and potentially fatal diseases spread through human, animal, or plant populations."
It went on to state, "Our insurance operations expose us to claims arising out of catastrophes. Catastrophes can be caused by various unpredictable events, including, among others, earthquakes, hurricanes, hailstorms, severe winter weather, wind storms, fires, tornadoes, and pandemics."
The 2017 disclosure was not the first time Hartford raised pandemic concerns in respect to its insurance operations and financial health of the company and operating divisions. In fact, the concern was first raised in 2006 -- the same time as the ISO published what is now known as the "virus exclusion."
Hartford continued to raise pandemic concerns from 2006 through 2019 when it stated, "Among specific risk tolerances set by the Company, risk limits are set for natural catastrophes, terrorism risk and pandemic risk." Thus, for more than a decade, Hartford was explicitly aware of the risk posed by a pandemic.
THE ENDORSEMENT
In 2018, Hartford copyrighted and placed into market a virus endorsement:
Two points jump out from this endorsement. First, Hartford quite obviously concedes that a "virus" can cause direct physical loss or direct physical damage, and this is buttressed by the second point which is that Hartford will pay for "removal" of the virus.
This all seems to be fairly straightforward until the policy further states that the virus must be the result of a specified cause of loss:
The problem? There is no specified cause of loss that can result in a "virus." While a virus may spread in a number of different ways –including surface contamination – it must always originate in a living host and exposure to an infected bodily fluid.
THE BASICS OF VIRUSES
A virus is a submicroscopic infectious agent that replicates only inside the living cells of an organism. Viruses are microscopic parasites, generally much smaller than bacteria. They lack the capacity to thrive and reproduce outside of a host body. The fact that some viruses that infect humans share structural features with viruses that infect bacteria could mean that viruses have a common origin, dating back several billion years.
ARE VIRUSES ALIVE
Yes and no. We probably all realize that viruses reproduce in some way. We can become infected with a small number of virus particles – by ingesting particles expelled from an infected person, for example – and then become sick several days later as the viruses replicate within our bodies. Viruses do not, however, carry out metabolic processes.
WHERE DO VIRUSES COME FROM
There is much debate among virologists about this question. Three main hypotheses have been articulated: One, the progressive, or escape, hypothesis states that viruses arose from genetic elements that gained the ability to move between cells; two, the regressive, or reduction, hypothesis asserts that viruses are remnants of cellular organisms; and three, the virus-first hypothesis states that viruses predate or coevolved with their current cellular hosts.
Source: The Origins of Viruses
By: David R. Wessner, Ph.D. (Dept. of Biology, Davidson College) © 2010 Nature Education
ILLUSORY COVERAGE
The Hartford itself, based on its SEC filings and specifically its 2017 filing, knew that pandemics are caused by disease spread through human, animal, or plant populations -- not through any specified cause of loss listed in the policy.
In a word, therefore, the Hartford endorsement is illusory. The doctrine of illusory coverage, which serves to balance the rights of insureds with those of insurers and is seen as a corollary to the ambiguity doctrine, states simply that the language, construction, or interpretation of an insurance policy can neither nullify the very purpose of the policy nor be so tortured as to result in the illusion of coverage.
The purpose of the Hartford endorsement was to provide coverage for damage caused by a virus. The specified cause of loss limitations render that coverage illusory. This is the crux of our cause of action against Hartford in two cases, one pending in the Northern District of Georgia and the other in the process of being remanded to state court in Alabama.