Dairy is the latest round of kitchen staples to suffer from viral diagnoses.  In a first, the H5N1 virus, commonly referred to as the bird flu, is rapidly spreading through US cattle herds.[1]  The virus has already been detected in pasteurized milk sitting on grocery store shelves.[2]  The World Health Organization labeled the outbreak an animal pandemic, but fears of animal to human transmission are rising.[3]  To prepare for the potential financial impact of this looming outbreak, livestock owners and businesses should consider their insurance policies as possible sources of recovery.

Livestock Insurance and Mortality Policies protect against unexpected events and accidents, but rarely cover death caused by disease.  An insured should carefully review its policies for mortality coverage which may provide relief notwithstanding typical policy exclusions.  These endorsements may cover the costs of medical expenses, injury, accidents, illness, and disease arising out of the latest bird flu outbreak.

Livestock Gross Margin and Livestock Risk Protection Policies provide relief for losses stemming from market conditions that impact livestock business and owners.

Recall Insurance Policies protect policyholders from losses caused by recalls.  While the Food and Drug Administration has initially deemed the contaminated milk safe to drink, if there is a change in policy and dairy products must be recalled, this insurance may  protect businesses from the costs associated with recalling defective items, including removing products from the market and replacing them, funding public relations campaigns necessary to rehabilitate brand images, and providing recovery for lost sales and revenues from temporarily halted operations.

Business Interruption Coverage protects against consequential losses from stamping out requirements and standstill zones put in place by government authorities.  This coverage provides vital protection against loss of income or profit per day while livestock owners or businesses are prevented from utilizing their cattle. 

Contingent Business Interruption Coverage provides relief for businesses other than the livestock owners for supply chain risks.  Given the widespread use of dairy and the guaranteed impact on business ranging from feed producers to dairy customers, this type of coverage can provide valuable insurance for losses from decreased sales and supply. 

Many Policies Exclude recovery for bird flu and other animal pandemic related losses, but those same policies often contain numerous exceptions to those exclusions.  Further, many insureds have purchased mortality insurance or express bird flu coverage, that might be subject to sub-limits, which will ensure protection against the losses that will arise from this outbreak.  Every policy is different, so do not assume that policies exclude coverage for these risks.

As the bird flu outbreak continues to develop, all businesses in the livestock and dairy industries should carefully review their policies with coverage counsel to maximize coverage for the eminent, widespread loss the outbreak will cause.

[1] See https://www.cdc.gov/flu/avianflu/mammals.htm

[2] See https://www.pbs.org/newshour/show/fragments-of-bird-flu-virus-detected-in-cows-milk-sold-in-grocery-stores

[3] See https://www.businessinsider.com/bird-flu-cattle-outbreak-repeat-mistakes-former-surgeon-general-warning-2024-4