Business Interruption Insurance and COVID-19 – Am I insured?
With businesses closed and much of the population in a Government-imposed lock down, many business owners are questioning whether their business interruption insurance (“BI”) will cover the financial losses caused by the COVID-19 pandemic.
COVID-19 and Key Dates
COVID-19 is a previously unknown disease whose spread has resulted in the Government imposing unprecedented emergency measures, creating a world far from the imagination of most insurers when these policies were issued.
Since the start of the year, there have been key dates which are relevant when considering the policy wording and conditions.
| 31 December 2019 | Virus first reported in China |
| 5 March 2020 | UK Government introduces legislation adding Covid-19 to the list of notifiable diseases, placing a legal responsibility on medical professionals to tell health officials of suspected cases immediately. |
| 11 March 2020 | World Health Organisation declares Covid-19 a pandemic |
| 17 March 2020 | UK Government declares that for those businesses which do have a policy that covers pandemics, the government’s action is sufficient to allow businesses to make an insurance claim against their policy, following their reaching an agreement with insurers. |
| 23 March 2020 | Social Distancing and lockdown measures announced in UK |
| 24 March 2020 | Lockdown introduced in UK |
| 25 March 2020 | Coronavirus Act 2020 comes into force |
| 26 March 2020 | Health Protection (Coronavirus Restrictions) Regulations 2020 comes into force |
Claims under Business Interruption Insurance Policies
Claims under BI policies can be complex and whether you are insured or not will depend upon the specific policy wording in place and its interpretation, as they have particular conditions of cover and exclusions, together with definitions that may limit the apparent extent of the cover.
What is generally covered?
In short, BI covers against loss of income or profit during a period when your business cannot trade as usual due to an unexpected event beyond your control. The intention is to restore your business to the same trading position as it was before the event occurred.
Limitations
The policies may contain a time limit affected how long losses can be claimed for or a financial limit, which may restrict the extent of any claim.
Which Polices provide cover?
If you have BI, this may be found in:
- A specific BI policy
- A general business insurance policy
- Property insurance covering the location where your business operates.
Claims under Business Interruption Insurance Policies for COVID-19
The crucial question here is what is covered and no doubt this will lead to litigation and potential class actions against insurers for clarity. Many insurers are setting out their positions online regarding COVID-19 and the short answer from the insurance industry is that Business Interruption insurance policies are unlikely to cover COVID-19 losses. Despite the UK Government announcement on 17 March 2020 raising the prospect of BI claims, the Association of British Insurers (ABI) insists that this will change little, as the vast majority of policies do not cover anything related to COVID-19.
In addition:
- Many policies will list the diseases they cover
- Most commercial policies do not cover for business interruption caused by pandemic
- Only some policies cover compulsory closure caused by any notifiable infectious disease.
- Self-isolation may not be covered despite the affect it may have on your business
In short, a standard Business Interruption insurance policy will not cover the economic impact of a pandemic such as COVID-19.
Possible Cover
However, there are two extensions which, depending on the specific wording of the policy, might cover business disruption related to COVID-19:
- Infectious Disease Extension
By its very name, this would seem to fit the current circumstances, as COVID-19 is an “infectious disease”. But the problem is that many BI policies which provide this extension will specifically list which diseases the policy covers. Bearing in mind that COVID-19 only became known recently, it will not be listed in policies issued prior to the pandemic and so, will not be classed as an infectious disease for the purposes of making a claim.
The only possible argument which may be run is where a policy states that the cover will apply to any variant of a listed disease, as there is some suggestion – albeit not proven – that COVID-19 may be related to other conditions.
However, if you are lucky and have a wide BI cover, this may apply to “any notifiable disease”. If so, following the Government’s action in naming Covid-19 as a notifiable disease in the UK on 5 March 2020, this may well cover you for any losses incurred from that date but not those incurred before. But such policies are rare and even if you do have one, you will need to review the policy wording carefully to ensure that the pandemic is not excluded. Insurers will be looking to their wording to try and avoid claims where possible and this will lead to a conflict on the interpretation of that wording.
Another issue which may arise is that many BI policies will include the infectious disease extension but, on the proviso, that the disease is only covered if found on the insured’s business premises or within a certain distance. Bearing in mind that cases of infection are widespread, this condition may be met but you will need to check the policy wording to see what distances are stated there, if any.
- Denial of Access Extension
This extension provides cover where a business is prevented from accessing its property due to any event or the actions or restrictions imposed by a public authority, such as the Council or the Government.
Although the wording will need careful review, there may be cover to protect a business and the disruption caused by the pandemic.
Summary
Many businesses will be looking to their policies to see whether they are covered for the current crisis but unfortunately, the reality is that very few will be for some of the following reasons:
- The BI policy is unlikely to cover losses specifically due to COVID-19.
- Most policies name the diseases they provide cover against.
- Many policies require the outbreak of any disease to have happened on or close to your business premises.
If you have either the infectious disease or denial of access extensions, then check the policy carefully, as this may provide cover. However, any claim would start to run from the date restrictions were imposed and some insurers are taking that to be from 26 March 2020.
The bottom line is that you need to carefully check the policy wording. Insurers are issuing very detailed responses explaining their interpretation of their own policies in order to deny cover.
If you need advice as to your Business Interruption Insurance Policy and whether you may be covered against financial losses caused by COVID-19, contact Michael Mulcare at mmulcare@solegal.co.uk
For more information about how we’re supporting businesses through the Coronavirus, contact our Corporate and Commercial Legal Team on 01323 407555 or enquiries@solegal.co.uk
SO Legal Solicitors Eastbourne – 01323 407555
SO Legal Solicitors Brighton & Hove – 01273 069920
SO Legal Solicitors Hastings – 01424 709050
SO Legal Solicitors Uckfield – 01825 729840
SO Legal Solicitors Notting Hill – 0203 9677700