Business Interruption Insurance
Nearly all businesses have business interruption insurance as part of a “commercial- combined” policy. This may be wrapped into a small business package aimed at your business sector or part of a bigger portfolio of covers pulled together with your insurance broker. In most cases, this will not cover you for losses relating to COVID-19. This is because the trigger for the cover to be invoked relates to damage to property. However, a small minority of policies include an extension of cover relating to notifiable diseases. This may then be cross-referenced to include a specific list of diseases (which COVID-19 won’t be on) or expressly exclude pandemics. However, if your policy wording is drafted widely in relation to notifiable diseases, you may be covered.
Initially, get a copy of the full policy wording and check the details. If you think you are covered, notify your insurer of a claim. Don’t be surprised if they push back – the ABI have pointed out that insurance companies are simply unable to cover the full extent of losses faced by industry because of the outbreak and the broad level of Government support is consistent with this – but point out that you have the relevant extension of cover and believe you have a legitimate claim.
You will need to gather information together about the scope and scale of your loss. You are expected to mitigate losses, such as utilising Government schemes and suspending contracts where you are able to. You don’t need precise financial details at this stage - an idea of the sums will be enough. Don’t be generous in relation to customer refunds, where you want to help rather than are obliged to refund monies.
There is still some legal scope for insurers to argue that COVID-19 has not caused loss to businesses – the loss has arisen as a consequence of Government action to stop the spread of the disease, rather than directly affecting your business. This will require complex legal argument to resolve and you may need legal assistance to pursue the claim further.
Other insurances - Event Cancellation Insurance and Travel Insurance
Event cancellation insurance is more likely to cover cancellation due to COVID-19, but again, it is all in the wording of the precise inclusions and exclusions. The All England Lawn Tennis Club responsible for the “Wimbledon” tennis, has been expressly purchasing cover for pandemics for the past 17 years at an annual cost of approximately £1.5m. They are said to be making a claim for £114m against their policy and are undoubtedly feeling very smug.
The travel insurance industry is expected to pay out about £275m, but warns that they will only pay when insurers have exhausted their other options such as pursuing refunds and repatriation costs from airlines, when flights have been cancelled.
Lots of organisations are currently closed completely and as such their business premises are unoccupied. Combined commercial insurance policies cover property damage during a period of non-occupation but generally require certain steps to be taken if a property is empty for longer than a specified period – this is generally 30 days. Most insurers are waiving the requirement to notify them about being unoccupied (to avoid their call lines being flooded) and to visit unoccupied premises (whilst people are discouraged from leaving their homes) as long as the property is safe and secure, but there may be other stipulations such as shutting off electricity, boarding-up windows and disposing of stock that are also required. Check these carefully and comply as best you can. If there is something that cannot be done in the current circumstances, discuss this with your insurer and ensure that the communication is noted.
The insurance market is still operating and renewals are still occurring although the insurance companies have struggled a little over the last couple of weeks adjusting to home-working and dealing with queries and claims enquiries.
One area where renewals are problematic is the proper preparation of data upon which to quote a renewal. You may have difficulty setting out your claim history if you are able to make a business interruption claim and you may be unable to (with any certainty) set-out basic data about your expected turnover, number of employees etc… for the coming year, in order to scale your cover.
The FCA has advised insurers that policies should be renewed on the basis of the last known profile of their clients and that insurers must allow businesses to flex the policy once the future is better understood – perhaps triggering a premium reduction, if the business is reduced in scale.
If you are making a claim for business interruption at the point of renewal, it would be unwise to switch carriers, although the cover on offer for the new period is likely to exclude on-going cover for COVID-19 and pandemic. It seems likely that, without the purchase of expensive (!) express specialist cover, all policies of insurance will exclude pandemics generally and COVID-19 specifically from the scope of any policy or extension going forward.