Communicable Disease Exclusion Bars Coverage Under Event Cancellation Policy

The United States District Court for the Northern District of Illinois, in an opinion by Judge Gettleman, applying New York law, granted Those Certain Underwriters at Lloyd’s of London, Severally Subscribing to Policy No. RSC-1224 and known as Argo Managing Agency Limited and Markel Syndicate Management Limited’s (“Lloyd’s”) motion to dismiss its insured’s, Radiological Society of North America, Inc. (“Radiological Society”), amended complaint seeking a declaration that Lloyd’s is obligated to indemnify it for losses under an Event Cancellation Insurance Policy and seeking damages for breach of contract.  

Radiological Society was scheduled to hold its annual conference (the “2020 Conference”) between November 17, 2020 and December 4, 2020.  Radiological Society purchased an Event Cancellation Insurance Policy from Lloyd’s to cover the period of January 29, 2020 to December 4, 2020.  The policy required Lloyd’s to indemnify Radiological Society for all covered losses arising from an unexpected cause that resulted in the unavoidable cancellation of the 2020 Conference.  The Policy, however, included a Communicable Disease Exclusion. Additionally, Radiological Society elected not to purchase the optional additional coverage for “communicable disease.” 

Radiological Society cancelled the 2020 Conference due to travel and mass gathering restrictions, and it notified Lloyd’s of its claim under the policy.  Lloyd’s denied coverage because the 2020 Conference was cancelled as a result of a communicable disease. 

The parties disputed whether the Communicable Disease Exclusion barred coverage for the claim.  The exclusion provides:

This insurance does not cover loss arising directly or indirectly as a result of any communicable disease or the threat or fear of communicable disease (whether actual or perceived). 

This exclusion shall not apply unless prior to or simultaneously with the loss arising, the communicable disease is declared an epidemic or pandemic by the World Health Organization (WHO) or by Federal or Local Government Agency.  However, any threat or fear of communicable disease, whether actual or perceived, is excluded.

Radiological Society argued that the exclusion is ambiguous and capable of being interpreted as providing coverage for a cancellation because of a communicable disease that has been declared a pandemic.  The court disagreed: “Although it is poorly written in the negative, the court concludes that the exclusion is not ambiguous and, when given its clear meaning, bars [Radiological Society’s] claim for coverage.”  The court found the “obvious intent” of the exclusion is to bar coverage for losses caused by a communicable disease that had been declared a pandemic.  Radiological Society of North America, Inc. v. Those Certain Underwriters at Lloyd’s of London, Severally Subscribing to Policy No. RSC-1224 and known as Argo Managing Agency Limited and Markel Syndicate Management Ltd., No. 21 C 1265 (N.D. Ill. July 8, 2021).