The BIBA team is here to help members with their enquiries, here is our latest information on Coronavirus.
Insurance arrangements vary enormously and even within a defined subclass such as Travel or Shop policies, every wording is different, so it is important to examine the coverage. Because of this it is impossible to give a comprehensive, definitive position particularly on business insurance. However, below is some generic technical information that you may wish to consider when tailoring any communications to clients.
We have customer facing information on the BIBA website.
Commercial policies will not usually cover a non-damage business interruption (NDBI) loss because business interruption is triggered by a claim under a material damage policy.
A policy may be extended to cover Denial of Access including infectious diseases. Such extensions will be subject to insurers’ different terms and conditions.
Some policies will be subject to the insurer naming COVID-19 within its list of infectious diseases covered (unlikely as it is relatively new).
In other policies (though less common) there might be unspecified infectious disease cover where the insurers do not specify the diseases covered. This is more likely to be present in hotel, restaurant and supermarket risks.
N.B. Just because the Government has declared COVID-19 a notifiable disease does not mean it is covered under an insurers’ wording.
Where there is cover (named or unspecified) and the businesses trade or operation incurs a loss resulting from interruption of, or interference with business at the premises, because of an outbreak of an infectious disease then the policy may respond.
A Denial of Access extension may also include cover for interruption caused by the acts of Public Authorities, imposing for example a lockdown leading to denial of access. This this may cover infectious diseases with exceptions but may be limited to a certain radius around the insureds premises which won’t therefore cover distant locations such as airports, sources of tourists and suppliers/customers.
Those businesses that have NDBI cover that either includes Covid 19 or has unspecified infectious disease cover would expect to be able to claim for:
- loss of profits or loss of revenue or
- increased cost of working or
- additional increased cost of working,
depending on the policy basis of cover. However, costs for the cleaning, repair and replacement may further be excluded.
The impact may be instant; for example, a lockdown would mean the immediate closure of a cinema; or may be delayed, for example overseas suppliers’ shipments.
It is worth noting also that Denial or Prevention of access extensions will often have a shorter indemnity period than the main policy for example 3 months may be common.
Some Suppliers or Customers Extensions to policies would include NDBI for notifiable or infectious diseases. However, those premises would usually need to be named in the policy schedule and the same terms and conditions as above may apply.
Extensions to cover that will include losses arising from Coronavirus/Covid-19 are now highly unlikely to be available.
Some underwriters may, if the policies does not have a contamination exclusion consider damage to have occurred if a business could prove (ie through swab tests) that the virus was present and the premises had to close for a deep-clean. This may trigger the business interruption part of the policy. However, proving such a claim would be very difficult.
The current situation is very challenging, and each case may have to be discussed on its own merits.
Event cancellation insurance
For a large event policy there usually needs to be Government or local authority intervention, not just fear of a communicable disease having an effect on attendance.
If a policy includes communicable diseases and if the acts of a Government or public authority as a result of the disease lead to the necessary and unavoidable to cancellation of the event there may be a valid claim for irrecoverable loss of costs or revenues, under the policy. Again wordings and conditions vary so individual policies would need to be looked at.
Corona virus is now a standard market exclusion on new event cancellation policies.
Sedgwick Case Study
Crawford & Co which you may also find useful.
If you have any specific queries we will of course endeavour to answer them for you.
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