With so many businesses facing losses in the current climate, many are asking us: will my insurance respond? Whilst different issues arise in different sectors, and no two insurance policies are the same, we have summarised some of the issues we have seen so far with overview guidance as insureds check through their insurance policies in these difficult times. We hope this is of help, and if you need advice on a specific claim please get in touch. Please remember that policies are not all identical and so terms and conditions must be carefully checked.
What type of insurance policy might cover my business for losses resulting from COVID-19?
All policies should be carefully considered as we have seen a variety of potentially responsive clauses. It is generally the business interruption ("BI") sections of policies that will be most relevant, with issues such as Government advice, actions and ordered closure, unspecified notifiable diseases, and prevention/denial of access to premises to the fore. Other specific policies may be relevant to other businesses, such as event cancellation/loss of attraction cover.
Can you claim in principle under a BI policy
Possibly. Much commentary indicates that most commercial insurance policies are unlikely to cover losses stemming from the outbreak of COVID-19 and the Government's response to it. But a BI policy needs to be carefully considered. It may very clearly specify that there is only cover for loss due to interference with or interruption of the business related to or consequent on property damage to the business premises. Damage is usually defined as physical loss, damage or destruction. Losses due to COVID-19 would not fall within this definition. But insureds should check if they have extensions for "non-damage BI"; and if they do, whether that extension applies to respond to the current situation. For example if there is "denial/prevention of access" cover, is that limited to a situation where the insured's access to its premises is hindered or prevented because of damage within the vicinity?
Is COVID-19 a notifiable disease?
Yes. The Government keeps an updated list of notifiable diseases. COVID-19 became notifiable from 5 March onwards: https://www.gov.uk/government/news/coronavirus-covid-19-listed-as-a-notifiable-disease. But beware: some policies that may otherwise cover the loss, such a non-property BI policy, may simply exclude all losses due to notifiable diseases; some may cover such losses but only from a designated list known about at the date of the policy (which therefore will not include COVID-19, and very recent policies may well specifically exclude it). But others will allow cover for diseases which subsequently become "notifiable" and therefore will apply to COVID-19. These are what the Government has termed "pandemic insurance policies".
Do the Government measures in principle trigger pandemic insurance policies?
Yes. On 17 March 2020, the Chancellor, Rishi Sunak, said “Let me confirm that, for those businesses which do have a policy that covers pandemics, the Government’s action is sufficient and will allow businesses to make an insurance claim against their policy." https://www.gov.uk/government/speeches/chancellor-of-the-exchequer-rishi-sunak-on-covid19-response.
Does it trigger unspecified notifiable diseases cover?
In principle, yes. But this is subject to the terms and conditions in the policy, in particular where cover is clearly limited to a situation where someone infected was on the premises, "in the vicinity of" the premises, or was within a specified radius.
Does it trigger policies covering Government or competent authority ordered closures?
Most likely. The Government asked a number of different businesses and venues to remain closed from 21 March onwards. Insurance industry representatives have agreed that this advice is sufficient for businesses covered for COVID-19 losses to make a claim if they otherwise would have cover (see Rishi Sunak statement above). As the Government issued orders on 23 March that everyone should stay at home unless working in certain defined occupations, this effectively means that Government action has prevented access to all businesses not specifically allowed to remain open.
Does it trigger event cancellation policies?
Possibly. It will depend on whether the policy includes any extensions and, as always, what the precise terms of the policy are and whether it has any relevant exclusions. Most commercial insurance policies are bespoke. Taking the Olympics as an example, there has been much comment about whether insurance will provide a financial lifeline to the IOC. It has been widely reported that Swiss Re has an event cancellation exposure to this year's now postponed games of £250m. But whether cover will respond is by no means certain. It may depend on the interpretation of wording that is likely to refer to cancellation being "as the sole and direct result of a cause entirely beyond the policyholder's control". As the Japanese Government did not mandate the postponement, one can see issues arising here. The situation is further complicated by the fact it is a postponement and not a cancellation. All other parties involved, from national associations to media partners and other commercial entities, will also be looking to their insurances at this time to see if cover may respond. And the same goes for all other cancelled/postponed sporting and social events, from the Boat Race to Wimbledon, the Grand National and Glastonbury.
Practical guidance for COVID-19
Read the latest COVID-19 related updates on our hub.