Business Interruption Insurance – do you have a claim?

posted by KeithDaniel

There has been considerable publicity in relation to potential insurance claims businesses may have arising out of disruption caused by the Covid-19 pandemic.

Early on in the crisis the Association of Business Insurers and the UK Government announced that it was unlikely that most commercial insurance policies would cover losses caused by a pandemic.

Is that actually the case? There are a wide number of policy wordings in use, so that such general views should be treated with caution. 

The Financial Conduct Authority (FCA) have commenced court proceedings which will proceed to an expedited trial this summer. The proceedings will seek to obtain guidance from the court as to specimen wording used in a variety of insurance companies. This should help in clarifying coverage for a large number of potential claims.

In the meantime, businesses should check what cover they have available as a matter of urgency. Potential cover most commonly arises from property insurance, though there may also be cover in event cancellation policies, employment liability and directors and officers (D & O) policies.

Sometimes policies provide cover for loss of profit when business has been interrupted. If the policy specifically refers to a ‘pandemic’ then there is a greater chance of cover. However many property insurance policies often include a clause that provides that there would actually need to be physical damage to business premises themselves. This potentially means that Covid-19 would need to be found at the premises themselves for the cover to bite.

A number of policies may contain wider coverage, and Covid-19 ‘in the vicinity’ may be covered. In addition, direction given by government to close workplaces may also have an impact on the applicability of cover. There is also a debate around whether existing interpretation of ‘damage’ should be wider.

The critical steps for businesses at this stage are as follows:

  • Check existing policies for cover and take advice on the potential scope
  • Consider cover extensions and exclusion clauses
  • Review any policy conditions – and particularly any conditions on the notification and reporting of claims – cover can be excluded if such terms are not followed and claims should be notified before the outcome of the FCA litigation
  • Compile supporting documentation to prove your claim

There will likely be a number of legal issues created by insurance cover in light of Covid-19 in the coming months. The overriding point is that there may be cover where early indications suggested there would not be. 

Our dispute resolution team can provide further advice and guidance in relation to considering and pursuing such a claim. Please contact us for an initial discussion on a no-obligation basis at dispute@berrysmith.com or 029 20 34 55 11.