“If you are generally well equipped to deal with a zombie apocalypse you will be prepared for a hurricane, pandemic, earthquake, or terrorist attack.” – Dr. Ali Khan, Director, Office of Public Health Preparedness and Response.
The U.S. Centers for Disease Control and Prevention (CDC) has provided guidance for surviving a zombie apocalypse in order to promote preparedness. Can looking toward the circumstances of a zombie-infested world teach us what issues may arise in the insurance industry as well? While the reality the Grimes gang of “The Walking Dead” lives in is rather bleak, we can consider the insurance implications on a relatively smaller, World War Z-style outbreak (the Max Brooks novel, not the Brad Pitt star vehicle).
Health or life insurance: Who pays?
One of the first issues to consider is whether zombies are the “living dead” or the “undead.” To the average person this may seem like a simple case of semantics. However, in the insurance arena, this question could spark a serious debate between health insurers and life insurers.
From one perspective, health insurers will not want to cover the recently reanimated “undead,” who could incur great medical costs, assuming zombies seek medical attention. Considering the limited earning potential of those without functioning cognitive ability and insurers’ inability to deny coverage for preexisting conditions, the majority of zombies will likely look to Medicaid or to subsidized policies sold on a state exchange for coverage. These choices will lead to even more uncertainty (and possibly morbidity) for health insurers surrounding the demographics of the expanded Medicaid population. Of course, given that zombies are unlikely to visit a hospital—unless they are looking for a meal—there might be a dearth of claims, making zombies the next best thing to the “young invincibles” who are coveted members of a health plan’s risk pool.
On the other hand, life insurers will push to delay the time of death to increase the investment income on their policies. In all likelihood, the courts will be asked to decide when health insurance coverage ends and life insurance is paid. As Clarence Borel’s case set a precedent for all future asbestos claims, a landmark decision clearly defining what is meant by “time of death” may set a precedent that will be followed by both health and life insurers.
What happens when you’re overrun (by claims)
If it is decided that zombies are the “living dead,” life insurers will be required to pay benefits for reanimated corpses. This is an example of pandemic risk for life insurers, as a significant outbreak would likely cause an extreme mortality event. Events like these will obviously increase the number of claims, but could also increase asset risk through capital market instability and personnel risk as staffing levels are affected because of illness, quarantine, or evacuation. Life insurers will need to properly prepare for extreme mortality risk through a risk management program and appropriate risk mitigation. Although the likelihood of an extreme mortality event caused by a zombie uprising is remote, such events can also be brought on by infectious disease, war, terrorism, and natural catastrophes.
Exclusions: Cause and effect
As zombie hordes begin to roam the country, homeowners policies will need to be adjusted. Most homeowners policies cover damages caused by vandalism; but will damages caused by a mob of the undead be covered? If asbestos, pollution, and flood losses are an indicator, it is likely that zombie damage exclusions will be created to reduce homeowners policies’ exposure to these unique, but substantial, losses. Will policyholders, for instance, need to prove that the proximate cause of the damages was a looting mob rather than an undead one?
In the aftermath of Hurricane Katrina, the legal landscape was filled with battles over the “efficient proximate cause” of damages, requiring losses that were due to an excluded peril to be covered if the cause of the excluded peril was a covered peril, such as a windstorm leading to flooding or mold. Would zombie damage be covered if they followed looters into your home? Conversely, would damages from a covered peril be denied if the proximate cause was an excluded peril, such as a fire stemming from damages caused by a zombie?
Walkers: Can you blame them?
If zombies are considered the “undead,” they (or their lawyers) may be able to bring slip-and-fall lawsuits against property owners. While the biggest impact of these claims would be on the frequency and severity statistics of general liability books, the more interesting aspect is the state-by-state variation in comparative and contributory negligence laws. Without considering whether a zombie has the mental capacity to act reasonably, we assume that the courts will find them, to some degree, responsible for their own injuries. This decision would preclude the “undead” from collecting in a contributory negligence jurisdiction, where the plaintiffs cannot collect if they are deemed to be in any way responsible for their own injuries.
However, in comparative negligence states, the distinction between pure comparative and modified comparative negligence laws will create significant differences in potential losses. Consider a scenario where zombies are deemed 75% responsible for their injuries. In a pure comparative negligence jurisdiction, they would be able to collect 25% of the total loss; however, in a modified jurisdiction, they would not be able to collect any damages. It would be reasonable to speculate that insurers with significant exposure in pure comparative states would either lobby for a change to modified comparative negligence laws, or decrease writing in pure comparative states.
While we can see the insurance issues surrounding a zombie apocalypse have real world connections, we have not considered the potential work that can be done to manage the associated risks. The effects of population density on catastro-Z modeling are particularly concerning. And how do we put a dollar value on the remaining “life” of a zombie, anyway? For now, we’ll leave that research to the survivors.