COVID-19 Business Interruption Insurance Claims Update

Claims consultant Harris Balcombe has been supporting those who have had insurers reject their claims. Alex Balcombe said:

“I’m sure this judgement will be of welcome relief to the hundreds of thousands of companies who had taken out business interruption (BI) policies but were advised that the virus was not covered by them.

This judgement says that most, but not all, of the disease clauses in the sample do now provide cover.

This ruling will impact almost every sector and while this outcome is good for businesses, it also highlights a systemic issue with business interruption policies – that there is a major lack of clarity for businesses over what BI actually covers. Therefore, the wording needs to be less vague in order for customers to determine whether they are able to make a claim. The outcome of this case will have implications which go way beyond the eight insurers named in this case.

The ruling did not say that the eight defendant insurers will be liable across all of the 21 different types of policy wording in the representative sample. However, policyholders who have struggled are in a much stronger position due to this ruling and should now seek professional advice to progress any claims successfully.

It should also be noted that there will inevitably be an appeal following the judgement, which I would imagine will go direct to the supreme court.”

In this time of uncertainty one of the obvious sources of redress to compensate businesses for the increased costs which they are incurring, and for the profit they are losing, is to consider a claim on their insurance policy and make a business interruption claim due to COVID-19. There are a number of different types of policy available to businesses and many will be tailored to specific sectors. Policy wordings, whilst likely to be similar in many instances, will also differ and each needs to be considered in its own right. 

In a press conference on 17 March 2020, the Prime Minister and Chancellor of the Exchequer confirmed that the Government had reached an agreement with the insurance industry such that, if a policy is only designed to respond when a business has been compelled to shut, rather than being urged to shut, the insurance industry understand that policies should respond. How this might work in practice has yet to be seen.

The Government has informed the public that struggling businesses will be able to claim on their business interruption insurance for business interruption claims due to Coronavirus (COVID-19). For most, this is wrong. In fact, the vast majority of policies do not cover anything related to COVID-19.

The insurance industry has been extremely vocal that there is no cover for any coronavirus-hit businesses during this tough financial period.

You may be covered, but not know it

Following the test case judgement it is now a distinct possibility that your current cover already protects your business against the consequences of coronavirus – and the nationwide response to it – though those with this cover may not realise it.

There are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:

Infectious Disease Extension  

• Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover. Being a new disease, when the policy was written, COVID-19 will not have been included.
• Other policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible you may fall into this definition, and be able to make a claim.
• Many policies require the disease to be on your premises, others specify a radius from your premises.

Denial of Access Extension (non-damage)

• This may cover you if you are prevented from accessing your property by an event, or by the actions of a competent authority, thus causing your business interruption cover to engage.
• In this clause, there are often very subtle differences in wording, depending on the insurer or policy. You may be covered, but it will depend on your particular circumstances and the specific policy wording.

What should businesses consider when making a claim due to Coronavirus?

As well as considering whether there is any statutory redress available to them, businesses should consider their policy wording including:

1. Do you have cover for Notifiable Disease and/or Denial of Access (these are common extensions to cover for business interruption)? 
2. If so, is the cover limited in scope such as for specific diseases only or where the specific disease has been found at the insured premises?
3. What period of interruption is covered and what is the sum insured?
4. Might any other section of the policy respond?

Cover for a Notifiable Disease will depend on whether Covid-19 comes within the list of defined diseases in the policy (which is not uncommon since the SARS epidemic), although wider wordings do exist.

Disputes over business interruption policy coverage

It is not uncommon for arguments to arise between policyholders and insurers about policy coverage and whether a policy is designed to respond in a given scenario. If insurers have refused cover, on the basis that they say the policy does not respond to issues arising from Covid-19, businesses should consider whether that is right. 

In a case we have been looking at, a reputable insurer has declined to investigate a claim on the basis that: “the core coverage is for interruptions to the business following insured damage”. There is, however, a Public authority clause in the policy which covers financial losses arising from:

“your inability to use the insured premises due to restrictions imposed by a public authority during the period of insurance following :

1.  a murder or suicide;
2. an occurrence of human infectious or human contagious disease, an outbreak of which must be notified to the local authority; . . .”

There is no need to show that any physical damage has been caused to the insured’s property or indeed any property.  Just because an insurer tells you that the policy does not respond to financial loss arising from the effects of Covid-19, does not necessarily mean that that is the correct position.

We have the most experienced team of business interruption insurance experts acting for claimants in the UK, who specialise in large and complex claims. Although these claims are not simple, our team has the skills and knowledge necessary to work through such complexities.

People throughout the world are understandably facing all kinds of worries because of the current pandemic. If you own a business and are unsure about whether you can claim for business interruption please get in touch with us here.