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Global Scale by Coletta Kemper When Pigs Fly

Your business or client may not be covered for a swine flu pandemic. It’s time to get your house in order for the expected surge.

By  Coletta Kemper

The 1918 Spanish flu killed an estimated 50 million and possibly more—a global disaster. But, like many influenzas, it started out mild and built strength as it moved around the globe.

Today we’re facing a threat from H1N1, the so-called swine flu, which is flying across country borders faster than a SR-71 Blackbird. H1N1 is actually a combination of seasonal, swine and avian flu—a potentially lethal combination.

In case you skeptics aren’t convinced, health experts warn it’s not a matter of if we will be hit by another deadly pandemic, it’s a matter of when. As former U.S. Health and Human Services Secretary Mike Leavitt says, “Let’s acknowledge that anything we say before a pandemic occurs feels like an exaggeration—feels alarmist. But anything said afterwards, it shows a lack of preparation.”

Outside of Mexico, the strain hitting the U.S. and other nations seems to be mild, but come fall, the virus could return with a vengeance.

Elizabeth Demaret, managing director of Arthur J. Gallagher, says health officials are closely watching what happens in South America and other southern hemisphere countries as they head into the height of the flu season—fall and winter. That experience will help health officials gauge the flu’s virulence.

If a pandemic strikes, it will affect every aspect of our lives. While we all will need to take precautions, businesses particularly need to prepare for the potential widespread disruptions a pandemic could cause. What do you do if large numbers of workers fall ill or even die, if customers stop coming, if supplies are blocked at the border, or if public officials mandate closures?

There are a number of workplace insurance and liability issues at stake. Unfortunately, insurance may not apply to specific situations resulting from a pandemic, so risk managers need to know what their policies cover and what is excluded. Brokers can help assess the risk and develop a plan to protect the business and workers.

Business interruption: A pandemic could cause widespread disruption to business from sick workers, a lack of customers and closure. But business interruption insurance may not cover the losses. Business interruption insurance is designed to cover the loss of income incurred if normal business operations are disrupted or halted by damage to property. Most policies exclude losses due to contamination and pandemics. It’s questionable if there is coverage if the government mandates closures.

Workplace liability: If workers fall ill from the flu, the major workers compensation question will be whether they were infected on the job. If the flu is widespread, it may be difficult to determine the source of contagion. Travel to highly affected areas may raise other liability issues. Employers may have a legal obligation under the Occupational Safety and Health Act to take steps to protect the health of employees traveling to high-risk areas. OSHA’s “general duty clause” requires employers to provide a workplace “free from recognized hazards that are causing or are likely to cause death or serious physical harm.”

There may be exposure depending on how companies respond to an outbreak in the workplace and on an employer’s obligation to protect workers. Some of the questions are: Did the company fail to act reasonably to protect workers and did the company take reasonable steps to identify and contain the exposure. D&O claims could also arise regarding how companies respond to a flu outbreak in the workplace and whether conduct causes financial damage to the firm. Employers should also check federal and state employment and discrimination laws.

Supply chain and trade disruptions: Many businesses rely on suppliers to stay in business. An interruption in the supply chain, including border closings and trade restrictions, could seriously damage a business. Coverage options are limited. Trade disruption insurance could offer some limited coverage. Businesses should talk to suppliers to find out their contingency plans in the event of a pandemic.

In addition, Demaret says, it’s very important to get the human resources department involved early on. A company should have clear internal policies and procedures on how to respond to a pandemic. Those should include policies for leave of absence due to sickness, paid time off, vacation and disability. Other support services can include mental health resources to help employees during the crisis.

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