Last updated: 19 March 2020
Businesses, big and small, are contacting us to see whether the latest containment actions recommended by the Government, which will undoubtedly be causing financial loss, operate as triggers to cover under a variety of business interruption policies. Despite launching a new COVID-19 business interruption loan scheme, the Government is coming under increasing pressure to reconsider its current stance where business customers have been advised to stay away but no order for closure has been given. This impacts the ability of businesses to claim against otherwise responsive sections of their business interruption insurance policies. Entertainment and hospitality enterprises are expected to be hit particularly hard by the current crisis. Insurers are likely to respond in terms that they require a direction from Government that businesses close in order to protect public health before business interruption policies are triggered.
The Chancellor has recently stated 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." So, that is the Government saying its action – recommending to stay at home, self-isolate and avoid visiting communal spaces – is a trigger for cover, if you have a policy that covers pandemics. This would tie in with the FCA's announcement that COVID-19 had changed customers' behaviours, and they should be treated fairly by insurers, and that insurance firms need to take this into account.
Whilst it is impossible to give any form of generic advice on this, as each insured's situation is different and policy terms vary hugely, the first step is to check the policy terms; in particular to see if financial loss is dependent on there being some form of physical damage to your property; or do you have standalone cover for, e.g. denial of access, loss of attraction, notifiable disease, act of competent authority? Whilst the Association of British Insurers has indicated that the vast majority of businesses would not be covered for business interruption of the type caused by COVID-19, the Government says ministers are in regular, frequent dialogue with the insurance industry and the key stakeholders they represent. As a result insurers may begin to take a less restrictive approach to coverage.
The Government has said that its action – recommending to stay at home, self-isolate and avoid visiting communal spaces – is a trigger for cover, if you have a policy that covers pandemics. This would tie in with the FCA's announcement that COVID-19 had changed customers' behaviours, and insurance firms needed to take this into account.
In the meantime, on behalf of our clients, we are continuing to submit notifications of loss to insurers. Clients have little to lose in making notifications. We are adopting a broad approach to policy interpretation and considering all possible angles in this unprecedented and rapidly changing situation. Indeed many policies contain language within the business interpretation sections of their policies that could in principle be broad enough to cover financial losses without a requirement to evidence physical loss (which of itself can be interpreted in a number of ways), damage or destruction.
Please contact any one of the Insurance team for further advice.
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