Coronavirus (CoVid-19) and Business Interruption Insurance
You will have seen reports over recent weeks relating to the Coronavirus (COVID-19) Pandemic by media and government agencies, advising businesses to contact their insurers in order to claim under their Business Interruption insurance. Such media coverage on this subject has not been helpful and whilst HM Government referred to it being a “Pandemic”, very few policies and clients purchase this cover, in fact it is typically only available to large multi-national companies!
It was also previously announced on 4 March 2020 that the Government will formally register Covid-19 as “notifiable”. Although this is good news in some respects, it does not automatically mean that businesses will be able to claim under their business interruption insurance. Business Interruption insurance cover typically triggers when insured damage is caused to the insured property that then creates a financial interruption to the business. A good example here would be the effects of a major fire or flood. With CoVid-19 there is clearly no damage, and the only other potential route was a claim through a “Pandemic” extension or through an “Infectious Disease” extension but this comes with caveats.
Special covers for business interruption without property damage are available as an extension but are not widespread. This type of coverage usually requires an outbreak at the premises itself to claim for a notifiable disease interruption, as well as a “denial of access” order by public authorities. Importantly, most insurers specify exactly which notifiable diseases they cover. It is unlikely that Covid-19 is on this list and so will not be covered.
So the general rule of thumb is that Business Interruption insurance is not going to pay out as a result of a new and emerging disease like COVID-19. This is because insurers are unable to cover a risk that they cannot assess. This is not the case for every policy but is the case for the vast majority.
Our advice to all businesses is to evaluate your business continuity plan, identify risks, mitigate them and determine alternative plans during this Coronavirus (COVID-A9) pandemic.
If you have any specific concerns relating to your insurance coverage with us, please do not hesitate to get it touch with your usual contact.