Coronavirus and Business Interruption Insurance – am I covered?

This has certainly been a topical question since the outbreak of the Coronavirus pandemic and unfortunately this has been poorly reported on a number of occasions.

To put it simply, your business interruption cover wasn’t specifically designed to offer cover for business interruption due to a pandemic; if it was then premiums would be significantly higher.  As an example the Wimbledon tournament organisers purchased specific pandemic cover and have done so for more than a decade, however this did come at a significant cost, widely reported at over £1.4M each year!!

But it mentions diseases in my policy – surely a global pandemic would fall under this?

Unfortunately this is not what the policies were designed for, the policies were designed for localised outbreaks.  Short term closures and cleaning of your premises was the aim of the coverage provided.

I’ve not purchased specific pandemic insurance – so I’m not covered?

Not strictly true, but highly likely, this is purely down to how your policy is worded.   Here at Spencer Hayes Group we’ve successfully negotiated payouts for some of our clients, where there has been scope to claim.

Whereas specific cover has probably not been purchased, your insurance policy is a legal contract, so if insurers have made ‘errors’ when writing the policy wording/endorsements/conditions and have possibly inadvertently provided cover, then you could have scope to make a claim.

So I could be covered – what do I need to look for?

It will be contained within your policy wording and also your policy schedule under the business interruption section(s) which will be your first port of call to check if you have the potential to claim.  The main areas to consider are as follows:

• Notifiable diseases: Most policies list specified diseases (Covid-19 has been a notifiable human disease in the Republic of Ireland since 20 February, in Scotland since 22 February, in Northern Ireland since 29 February and in England and Wales since 5 March) which could be covered – as Covid-19 wasn’t listed, then this tends to be the most common area where cover is refused.

That said, some policies, don’t list the notifiable diseases covered, just list those which are excluded (such as AIDS/HIV etc).  If you’re policy is worded in such as fashion then should be beneficial to those looking to claim for Covid-19 related business interruption.

• Vicinity: Some policies will stipulate where the outbreak is to have occurred.  Some state that such an occurance would need to have occurred at the premises, however others are wider which state a certain radius of the risk address, most commonly, 25 miles.  Nauturally, the latter is far more favourable.
• Physical Damage: Some policies may state that physical damage needs to have occurred, either at your premises, or in the locality (such as neighbouring properties) especially when trying to trigger a claim under prevention of access.  If this is the case, then you’ll struggle to progress a claim as physical damage probably hasn’t occurred.
• Prevention of Access: Touched upon in the physical damage section above, if physical damage isn’t a condition on your policy may mean you have scope to claim, however certain other factors come into play, such as a restaurant that is operating as a takeaway service.  It will come down to how the policy is specifically worded.

 

I don’t think I’m covered but following the Supreme Court ruling on the 15^th of January 2021, surely I am covered now?

Whereas this was a notable ‘victory’ for the FCA and some policyholders, unfortunately this wasn’t reported well within the media; if you weren’t covered before the ruling then you’re unlikely to be covered after.  The purposes of the Supreme Court ruling was to clarify some points of contention which insurers and policyholders/FCA were in dispute over, so basically the ruling is stating that those that should be paid, need to be paid, whilst also providing clarity over the main points of contention.

I’ve checked my policy and I think I’m covered – what now?

The first port of call is to approach your broker and/or insurer, however you can appoint a solicitor and/or a loss assessor who can assist you with this (however these are likely to require remuneration for their services).  Some points to consider:

• How much could I covered for? There are likely to be sub limits within your policy depending on what specific section of business interruption you’re looking to claim under.  In addition periods under certain sections can cover you for a shorter period, such as 3 months.
• What do I need to provide? You’ll probably need to engage the services of your/an accountant to prove your downturn (quite a number of policies offer coverage within the wording for reasonable accountants fees) – things to consider are any grants, additional government support (such as the furlough scheme), lower operating costs etc.  You simply can’t claim for the total amount covered under your policy, you will need to prove the specific loss for this period.
• How much excess do I need to pay? Generally there isn’t an excess to pay on business interruption claims, however this can differ from policy to policy.

 

 

We hope you found this useful, however if you require any further clarification or have any specific questions, please do not hesitate to contact Marc Kirker.