Coronavirus and Business Interruption Insurance.

March 2020

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UPDATE – 24th March 2020

Despite the widespread compulsory closure of many businesses we don’t believe the insurance position has changed for the vast majority of policyholders.

We are aware of various initiatives to challenge the insurance policy wordings and we are involved in some of these ourselves. However, this is likely to be a long-term issue and might need to be settled by the courts. It won’t provide an immediate answer for the cashflow problems businesses are facing now.

Government has announced various packages of assistance for business and individuals. We will study the details as they emerge and continue to adapt our own planning to ensure we can continue to serve our customers

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UPDATE – 13th March 2020

After a period of silence some of the major insurers have now come forward and essentially confirmed the position as we described it last week (see below).

We know some businesses, particularly in the leisure sector, are already seeing a general reduction in trade impacting income and cash flow. Sadly there isn’t any insurance solution for that.

Likewise, any future Government action of a general nature such as wholesale closure of businesses. lockdowns or travel bans will also not lead to valid Business Interruption insurance claims.

We hope any such official action in the UK will be accompanied by appropriate financial and practical support from Government.

Business Interruption cover is predominantly designed to cover a reduction in income following damage at your own business premises. Unfortunately, these policies can’t respond to the impact of a global pandemic.

We will try to continue providing frank and honest updates as the situation develops. 

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It has been announced recently (4th March 2020) that the UK Government has formally registered Covid-19 as a “notifiable” disease, following similar action by the Scottish and Northern Ireland governments.

It has been reported that this action will allow businesses to claim for any financial losses related to Covid-19, for example cancelled guest house bookings from foreign guests.

Unfortunately, that’s just not the case so we wanted to set out our view of the present position as regards Business Interruption insurance.

While the decision to register the disease as notifiable may help in some very limited circumstances, it doesn’t mean that all businesses will now be able to claim for all their losses. In fact, losses due to a general reduction in trade or even cancellations directly linked to concern about the disease, will definitely not be covered by Business Interruption insurance.

The only potential cover we can see is under a particular extension to Business Interruption cover (if you have it) which you will find named as “Notifiable Disease”, “Infectious Human Disease” or “Murder, Suicide or Disease”.

Even if this extension is in place there are requirements that need to be met before a claim can be triggered. Most importantly, your specific business needs to have been closed by the authorities following an outbreak of disease at your premises. It’s important to note that most insurers specify which notifiable diseases are covered. In those cases, Covid-19 won’t be on the list so there will be no cover. Some insurers might not specify a list so there might be some hope in those cases.

Even if you do meet the above requirements the cover extension will have a financial limit far lower than your normal Gross Profit sum insured so it’s unlikely to sufficiently cover an extended period of closure.

Insurance policies have not been designed to deal with a large-scale pandemic of the sort that we may be facing so it’s important that as businesses and individuals we make contingency plans as best we can.

Insurance cover will of course vary between policies, and the position will be different for other types of insurance such as Travel or Income Protection, so we recommend that you speak to your broker or insurer if in doubt.

Get in touch.