Business Interruption (BI) and Coronavirus – You may be covered
Following on from our recent Coronavirus Updates, we can confirm that you may have some cover for interruption to your business as a result of coronavirus. However, please note that this is not a guarantee that you are covered, we are still not sure if what has happened so far will trigger claims. If cover does apply it may also be limited.
If you did not receive the earlier updates, these can be accessed via the following links.
As explained in the Update 1, Business Interruption policies generally cover interruption to a business following ‘damage’ such as fire or flood but in recent years many policies have been extended to cover other eventualities including some ‘non-damage’ risks such as infectious diseases. However, most insurers specify the diseases they are prepared to cover and as coronavirus is a new disease, it is not specified and not covered.
The wording of your insurer’s policy does not specify individual diseases and once the Government made coronavirus notifiable, potentially, there is cover under your policy. Please note that a sub-limit and a shorter indemnity period (the period insurers will pay your losses following the event that gave rise to the claim) is likely to apply.
The cover will be under either a Denial of Access, Loss of Attraction or Disease extension, however, for cover to operate it needs to be ‘triggered’ by an event. Insurer wordings differ but typically there needs to be an outbreak of the disease at the premises, within the vicinity (this is normally a certain radius from the premises) or a compulsory closure of the premises by the authorities for public health or emergency situations.
Unfortunately, there have been contradictory or unclear messages from the Government and insurance industry as to what circumstances will trigger cover following the Government’s decision to close certain businesses.
At the time of writing, we believe that those businesses that have been forced to close, such as pubs, gyms, restaurants, cafes and more latterly most shops will be able to claim if they have cover for an outbreak in the vicinity. The position for businesses that have not presently been forced to close but have been affected by Government orders restricting public movement is less clear, although will have a strong argument for claims to be paid.
The position for those clients with policies that require an outbreak at the premises and for some, policies also requiring closure by the authorities is also not clear and as it stands, we are less positive unless you can evidence an outbreak at the premises. However, what constitutes an outbreak at the premises will also not be clear cut.
Insurers may try and argue that losses are not so much due to the localised incident but to the wider nationwide effect of the virus and absence of customers, however there is certainly Government pressure on insurers ‘to do the right thing’ by customers and the Financial Services Ombudsman also have wide reaching powers.
We are trying to obtain clarification from the various insurers and our trade association, the British Insurance Brokers Association (BIBA) are also lobbying for a market wide approach as to policy interpretation of the issues we have mentioned above.
We are sorry that we cannot give you a definitive answer at this time but will update you as we receive more information and can assure you that we will argue your case if an insurer is being unreasonable.
Hopefully the position will become clearer, but in the meantime, we would suggest that you take the following steps which will help should it be possible to pursue a claim.
As already mentioned you may need to provide evidence that there has been a ‘trigger’ for a claim, so record details of any known outbreaks of coronavirus at your premises or in the vicinity i.e. news reports in papers or online and if relevant, any action taken by the local authorities.
The amount paid for claims under Business Interruption policies is generally for a reduction in gross profit (as defined in the policy) rather than turnover, as well as reasonable additional expenses you incur in continuing to trade. Claims are calculated in a manner set out in the policy and you will be required to substantiate a claim. This information is usually available from most accounting systems, but we would also recommend that you keep a record of any cancelled orders/bookings etc as additional evidence.
Keep a record of any additional expenses you incur as a result of coronavirus. This could be overtime payments to staff, ‘we are still open’ type marketing or the increased cost of essential components.
You will appreciate that this is generic advice and if you require any more information about your own policies, please speak to your usual Nsure contact.
We also have a factsheet about Business Interruption on our website which will contain useful information.