COVID-19 Business Interruption Claims
GUEST ARTICLE: Our colleagues at insurance recovery specialists, Flag Partners, share their insights on insurance coverage issues relating to the Coronavirus.
We have had a number of enquiries regarding business interruption insurance coverage due to COVID-19.
On 5 March 2020, the UK government legislated to add COVID-19 to the list of notifiable diseases in England and Wales giving businesses some hope that their insurance cover will respond to coronavirus-related losses.
Business interruption insurance traditionally covers loss of revenue or profit experienced by a business following damage to property and the cost of mitigating that disruption. It usually forms part of a commercial property insurance policy. The trigger for coverage is property damage – for example, due to a fire or wind – and so this type of policy will not cover losses from disruption caused by COVID-19 where there has been no property damage.
The most likely route to cover claims for coronavirus-related losses are extensions to cover found in some business interruption policies. These are often triggered by non-physical damage such as prevention of access or closure of premises.
There are extensions which specifically cover infections or contagious diseases or losses arising from the inability to use business premises due to restrictions imposed by a public authority. However, there is no market standard for these extensions, so the wording of the policy must be reviewed carefully to see what is and what is not covered. A number of UK insurers in the past two weeks have been reported as specifically including contagious disease cover in their standard Business interruption wordings.
The current coronavirus outbreak appears to satisfy some definitions of disease now that it has been designated as a notifiable disease and declared a ‘pandemic’ by the World Health Organisation (WHO). Some policies even cover business interruption where there has been a notifiable disease within a certain radius of the insured building.
However, there will still be significant challenges to claiming under these extensions.
Other Business Insurance Claims
It is likely that there will be a number of valid insurance claims that are payable under the standard suite of business insurance policies. Vacant buildings often lead to physical loss claims such as water damage from burst pipes and there will be liability claims that arise directly or indirectly as a result of COVID-19.