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Avian Flu: Assessing the Risk, Part 1

By Lawrence S. Greengrass and William C. Kolb

Overview

The possible eruption of a worldwide avian or bird influenza epidemic already has grabbed media headlines and even inspired a made for network television movie called Fatal Contact: Bird Flu in America. The media attention given to the avian flu, some sensationalized and misleading, has generated fear among the general public. The possible avian flu pandemic also has captured the attention of much of the insurance industry, which has begun to assess the likely economic impact of an avian flu pandemic. In this paper, we analyze some of the critical insurance coverage issues that should be considered by insurers and reinsurers in evaluating their exposure to avian flu-related insurance claims.

What Is Avian Influenza (Bird Flu)?1

Avian influenza is an infection caused by avian (bird) influenza (flu) viruses. These viruses occur naturally among birds. Wild birds worldwide carry the viruses in their intestines without any ill effects. Avian influenza, however, can be very contagious and cause sickness and death in domesticated birds, including chickens, ducks, and turkeys.

Infection with avian influenza viruses in domestic birds causes two main forms of disease that are distinguished by low and high extremes of virulence. The “low pathogenic” form may go undetected and usually causes only mild symptoms (such as ruffled feathers and a drop in egg production). However, the highly pathogenic form spreads more rapidly through flocks of poultry. This form may cause disease that affects multiple internal organs and has a mortality rate that can reach 90–100% often within 48 hours.

Human Infection

The risk from avian influenza is generally low to most people because the viruses do not usually infect humans. However, confirmed cases of human infection from several subtypes of avian influenza infection have been reported since 1997. Most cases of avian influenza infection in humans have resulted from contact with infected poultry (e.g., domesticated chicken, ducks, and turkeys) or surfaces contaminated with secretion/excretions from infected birds. The spread of avian influenza viruses from one ill person to another has been reported very rarely, and transmission has not been observed to continue beyond one person.2

Symptoms of avian influenza in humans have ranged from typical human influenza-like symptoms (e.g., fever, cough, sore throat, and muscle aches) to eye infections, pneumonia, severe respiratory diseases (such as acute respiratory distress), and other severe and life-threatening complications. The symptoms of avian influenza may depend on which virus caused the infection.

H5N1 Virus

Influenza A (H5N1) virus—also called “H5N1 virus”—is an influenza A virus subtype that is one of the few avian influenza viruses that has crossed the species barrier to infect humans. H5N1 has proven to be deadly to humans. In the current outbreaks in Asia and Europe, more than half of those infected with H5N1 have died even though most of the reported cases have occurred in previously healthy children and young adults.

So far, the spread of H5N1 virus from person to person has been limited. At present, it appears that the virus can be transmitted from a first person (infected by poultry) to a second person, but not to a third person. Nonetheless, because all influenza viruses have the ability to change, scientists are concerned that H5N1 virus one day could spread easily from one person to another. To compound matters, there is little or no immune protection against avian flu viruses in the human population because these viruses do not commonly infect humans. If H5N1 virus were to gain the capacity to spread easily from person to person, an influenza pandemic (worldwide outbreak of disease) could begin. No one can predict when a pandemic might occur.

Treatment

The H5N1 virus that has caused human illness and death in Asia is resistant to amantadine and rimantadine, two antiviral medications commonly used for influenza. Additional studies need to be conducted to determine whether two other antiviral medications, oseltamavir and zanamavir, would be effective in treating influenza caused by H5N1 virus. In April 2005, research studies to test a vaccine to protect humans against H5N1 virus began. A series of clinical vaccine trials is currently underway.3

Predictions

Although the CDC has stated that no one can predict when an avian flu pandemic might occur, predictions have been made as to the impact of a possible pandemic. The U.S. government has predicted, as a worst-case scenario, that up to 2 million U.S. deaths would result from an avian flu pandemic. Standard & Poor’s, however, uses the 1918 flu-epidemic experience (U.S. deaths of nearly 700,000 and between 40 million and 50 million deaths worldwide) as its primary basis for predicting a worst-case scenario. The 1918 flu virus, believed to have originated from a mutated avian flu virus, has many similarities to H5N1 including its concentration in the young and healthy as well as the occurrence of primary viral pneumonia in the absence of secondary bacterial infection. With regard to possible workers’ compensation, short-term disability, and general liability claims as a result of a pandemic, Standard & Poor’s predicts:

Workers’ compensation might see a small jump in claims, but only for poultry workers who contract it. It would not be available for those whose work doesn’t bring them into direct contact with potentially infectious agents. Short-term disability insurance might also be a source of more general claims, depending on how long an employee is unable to work due to illness. General liability policies could experience claims, too, although those are likely to be minimal, as they would stem from lawsuits filed against companies accused of helping to spread the disease—a highly unlikely scenario.

Although Standard & Poor’s appears to assess the risk to the U.S. Insurance Industry as minimal, many believe that insurers and reinsurers should not put undue weight on such a general assessment but should carefully review the risks of the specific coverages insured or reinsured.

Workers’ Compensation

Viability of Avian Flu Claims

Depending on the language in the workers’ compensation statutes and policies in each state, workers’ compensation could respond to certain avian flu-related claims if the threshold compensability requirement is met. The majority of states’ workers’ compensation statutes require the claimed injury or illness to be “arising out of and in the course of” employment.

In all likelihood, the critical issue will be causation. Infected workers will have to prove that exposure to the virus “arose out of” and occurred “in the course of” their employment. The issue of whether workers will actually meet this burden will depend on the individual circumstances of each claim.4

Although coverage would depend on the specific statutory and/or policy language involved, it is unlikely that workers who merely contract the avian flu during the course of their employment or at their workplace would qualify for workers’ compensation benefits unless the risk of exposure is special or peculiar to the nature of the work involved such that it “arises out of” the employment. For example, health care workers might have compensable claims because they are especially at risk to the avian flu to the extent they would be required to have contact and treat patients infected with the contagious condition. Also, workers that are required to handle poultry as part of their employment duties would be the most susceptible to avian flu infection and are the most likely to have compensable workers’ compensation claims except, under some circumstances, farm workers who are exempt from workers’ compensation statutes.

For instance, under California law, a claim for injury or disability from a non-occupational disease—i.e., a disease that is not an incident to a particular kind of occupation and that is contracted merely because of exposure during work—is not compensable. To obtain recovery under the California workers’ compensation statute, it is not sufficient that the disease is contracted on the employer’s premises, but the disease must result from the hazards of the particular kind of employment. For example, in one California case, a recreational director asserted a workers’ compensation claim merely because she was exposed to and contracted polio at work. Johnson v. Industrial Acc. Comm., 157 Cal. App.2d 838, 321 P.2d 856 (Dist. Ct. App., Cal. 1958). The court held, however, that her disability was not compensable because claimant’s exposure occurred fortuitously and only incidentally during the course of her work as a recreational director and not from the nature of her work.

To illustrate further, in San Francisco v. Industrial Acc. Comm., 183 Cal. 273, 191 Pac. 26 (1920), a hospital steward contracted influenza while engaged in his employment duties during the Flu Epidemic of 1918. An epidemic of the disease was raging in San Francisco at the time and the disease was so infectious that one out of every ten in the city contracted it, and every member of the community was exposed to it to some degree. Nonetheless, the court upheld an award for the hospital steward because the medical testimony established, by a preponderance of the evidence, that the steward contracted the disease as a result of his peculiar exposure to it as part of his occupational duties.

Similarly, in order to obtain workers’ compensation benefits under New York law, a claimant must establish a recognizable link between the claimant’s condition and some distinctive feature of his or her occupation. Palmer v. SUNY Upstate Med. Univ., 14 A.D.3d 737, 787 N.Y.S.2d 489, 491 (3d Dep’t 2005). The fact that an injury is the result of a specific condition peculiar to the claimant’s place of work does not by itself make the claim compensable under the workers’ compensation statute. Martin v. Fulton City School Dist., 300 A.D.2d 901, 754 N.Y.S.2d 676, 677 (3d Dep’t 2002) (holding that a teacher’s chronic rhino-sinusitis and upper airway irritation resulted from exposure to dust and mold in a newly constructed school building where she worked, but was not compensable because her disability did not result from some distinctive feature of her employment as a teacher).

Notes
1 The website (www.cdc.gov/flu/avian) for the Centers for Disease Control and Prevention, U.S. Department of Health and Human Services (“CDC”), is the primary source of the information contained in this section except for the content in the “Predictions” subsection, which was obtained from a May 10, 2006 article entitled “U.S. Insurers Not Yet Feverish Over Avian Flu” discussing Standard & Poor’s and the U.S. Insurance Industry’s assessment of a possible avian flu pandemic. Another valuable reference for information and updates on avian flu is the World Health Organization’s website (www.who.int/en).
2 As of July 4, 2006, the World Health Organization (“WHO”) reported that 229 cases have been confirmed since 2003 resulting in 131 deaths. In 2003, there were only 3 confirmed cases resulting in 3 deaths. In the first half of 2006, there have been 85 confirmed cases resulting in 55 deaths. Confirmed cases have occurred in Azerbaijan, Cambodia, China, Egypt, Indonesia, Iraq, Thailand, Turkey and Vietnam. The WHO reports only laboratory-confirmed cases.
3 In July 2006, pharmaceutical company GlaxoSmithKline released promising preliminary results from clinical trials of its H5N1 vaccine. To make its vaccine, GSK used a strain of H5N1 that circulated in Vietnam in 2004. It is not known whether the vaccine will protect against other strains. The company plans on testing the blood serum from the immunized volunteers against more recent strains from Indonesia and Turkey, and also against older strains from the first H5N1 outbreak in Hong Kong in 1997.
4 With regard to exposure overseas, many states extend benefits to those injured outside their territory provided the contract of hire was made in the state or the principal location of employment is in the state. U.S. nationals assigned to work outside of the United States for an extended period or indefinitely generally are not covered by workers’ compensation policies absent a foreign voluntary workers’ compensation endorsement with language providing coverage for endemic disease, such as avian flu.

Read Avian Flu: Assessing the Risk (Part 2)

ABOUT THE AUTHORS

Messrs. Greengrass and Kolb are Partners at Mound Cotton Wollan & Greengrass.

Reprinted with permission from the Fall 2006 issue of Newsletter, a publication of Mound Cotton Wollan & Greengrass.

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November 2006