Business Interruption Cover for Coronavirus
Understandably the question that we have been asked most by our clients in the last 2 weeks has been does my business have any cover for loss of revenue or gross profit following the outbreak of the Coronavirus in the UK.
Unfortunately, the vast majority of Business Interruption cover will not respond to claims and losses caused directly as a result of Coronavirus.
This is primarily because insurance policies are set up to cover claims on a physical ‘damage’ to property at the premises basis. For example, as a result of Fire or Flood. But as this outbreak is a virus there is no actual physical damage to property.
Some policies do include extensions which could potentially provide some form of cover such as Interruption to the business following –
- An outbreak of disease – however Insurers generally specify the diseases they are prepared to cover and Covid-19 is not included in any Insurers specified disease cover. Some Insurers do not specify the diseases covered but simply state that any ‘notifiable disease’ is covered. The UK Government classed Covid-19 as a notifiable disease on 5th March 2020. Those policies may extend to provide some cover, but Insurers do have a range of exclusion clauses contained within the policies that they may look to trigger e.g. an epidemic outbreak. Some will only cover losses for disease occurring at the business premises or within a small radius from the premium e.g. 1 mile. For those clients with such cover we are advising you to talk to us first and then we can present potential claims on an individual basis for each client and advising on the Insurer response case by case.
- Closure of Premises by a recognised Authority – again some policies provide cover following the closure of a premises by a competent Authority. Cover may apply and we are again presenting claims on an individual basis. Most such extensions do specify why the premises are closed e.g. due to defective drains, vermin etc. And some specifically exclude closure due to disease.
It is worth noting that the UK Insurance Industry was quick to respond at the outset to the possibility of businesses making claims under their Business Interruption covers.
The Association of British Insurers (ABI) has stated: ‘Irrespective of whether or not the Government order closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the Coronavirus.
Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.’
So, the unfortunate summary is that we do not expect many, if any, claims for interruption to a business following the current Coronavirus outbreak to be covered.
But we are advising our clients on a case by case basis taking into account the specific client circumstances of a loss/claim, the Insurers concerned and their own specific policy wording.
Where we believe there may be some cover in force we are presenting claims to the Insurers for consideration – at the time of writing this we have not received formal responses on those claims that we have presented.
Please do speak to us about your own specific circumstances and we will advise you specifically with regards to your own policy cover.
Premises Temporarily Vacant
Nearly all Insurers are responding to advise they are understanding and accept that in these extraordinary times that many of their client’s premises will be temporarily vacated. Some have advised that they have extended their definition of vacant to 60 days and others to 90 days which effectively means that they are not reducing cover in respect of the premises within those time periods. We expect if the current ‘lockdown’ continues into June the Insurers will further extend those time periods.
Several the Insurers do ask where possible, safe and legal to do so that premises are physically inspected every 7/14 days.
Insurers have also asked that before closing down that where possible all necessary precautions are put in place to protect the property whilst it is unoccupied – Alarm Activated (where applicable), services isolated where possible, all locking devices operative, combustible waste not stored close to the property etc.
Cancelling Cover
We are not recommending that anyone cancels their cover during the Coronavirus outbreak simply because your risk exposures still exist even though you may not be trading currently. For example, your properties and assets still require insurance protection, third parties are still able to take legal action against you etc.
There may be options to reduce some covers but only where that reflects a change to your risk exposure e.g. restricting cover on vehicles during the Coronavirus outbreak to Fire and Theft as they are ‘laid up’ and temporarily SORN.
Please speak to us regarding your individual requirements and we can advise you.
Other Matters
The Insurers are responding on a case by case basis to such issues as –
- Can I restrict cover on my vehicles during the Coronavirus outbreak e.g. To Fire and Theft for laid up vehicles
- Can I reduce my estimates under my policy as I expect my turnover to be down due to the Coronavirus outbreak?
- Am I able to suspend my month premium payments temporarily?
- I am having to work form home now and so are my staff – how does that effect my cover
- Can my staff use Fleet vehicles for NHS Volunteering?
Please speak to us regarding your own individual circumstances and requirements and we can advise what approach your Insurers is taking.