The Covid-19 pandemic has presented a multitude of challenges for business including significant disruptions to supply chains and a potential loss of custom which, of course, will lead to an unfortunate loss of revenue.
As a result, businesses are questioning whether such losses will be covered by their insurers.
Dan Dowen, Commercial Contracts Associate Solicitor, considers the insurance cover that may be available for businesses, from a commercial and legal perspective.
First and foremost, businesses should review their existing insurance policies to determine which losses are covered as the availability of any insurance coverage will largely depend on the wording of the particular policy. It may be that businesses will need to prove that Coronavirus is the cause of a particular loss and establish the specific peril under which such loss would sit.
The common types of commercial insurance policies which may cover Coronavirus-related losses include:
1 - Business Interruption Insurance
Traditionally, Business Interruption Insurance is intended to protect businesses against losses and disruptions incurred as a result of damage to business property.
Contingent Business Interruption Insurance is also intended to cover such losses but usually imposes the condition that such loss must be due to damage to the supplier’s business property which has had direct effect on the insured’s business by causing disruption and loss.
Therefore, as Coronavirus-related losses will not consist of property damage, such losses are unlikely to be covered by such policies.
Notwithstanding, there may be scope for making a claim under these policies if the wording does not specifically require ‘physical loss or damage’ to insured property. A general loss of property could cover situations where a business is unable to use a property due to Coronavirus-related restrictions.
Contingent Business Interruption schemes often cover losses incurred as a result of a ‘civil authority’ prohibiting or impairing access to a policyholder’s premises. Again, this may provide ground for a claim if it can be established that a business cannot use insured property due to government instructions.
Seeking cover under these policies will not be straight-forward and will require accurate interpretation of the specific policy wording.
2 - Extensions to cover
Businesses are more likely to be covered for Coronavirus-related losses in extensions to cover that can often be attached to Business Interruption Policies for example, extensions that cover losses resulting from ‘notifiable diseases’.
At the beginning of this pandemic, many insurers advised that a business’ insurance policies will not cover them against losses stemming from Coronavirus until the government declares that Covid-19 is a ‘notifiable disease’. On 5th March 2020, the UK government announced that the Covid-19 has been added to the list of notifiable diseases in England and Wales, leaving businesses feeling more optimistic about the insurance coverage they may receive. However, this means that only losses incurred after the 5th March 2020 will be covered.
3 - Liability Insurance
There are various grounds on which employees, shareholders, customers, clients and members of the public may be able claim against a business for matters such as bodily injury resulting from exposure to harmful conditions if exposed to Coronavirus in the workplace.
If businesses have liability insurances in place, these policies will likely cover such claims.
4 - Cancellation Insurance
Many contracts for goods and services have been, or will increasingly be, cancelled under ‘force majeure’ clauses which mean that the parties will face no liability to each other for cancellation or termination. This will of course, make it difficult for parties to recover losses resulting from cancellation.
Cancellation insurance policies may cover the losses sustained from such cancellations, although businesses should review the wording of their policies to ensure that there are no exclusions for cancellations due to diseases or epidemics.
Advice for businesses
Overall, businesses may find it challenging to seek coverage from their insurers for losses sustained as a result of Coronavirus and the applicability of such coverage will depend on the specific language of each insurance policy.
Businesses should therefore review their policies in detail and note any relevant exclusions that may apply and speak with their brokers and insurers should they have any questions.
If you would like further information on this or would like to discuss how we can assist your business through this global pandemic or for any other commercial matter, please contact Dan Dowen at firstname.lastname@example.org or alternatively call 02920 345 511 and ask for the Commercial Team.