Covid-19 business interruption claim? – don’t catch a cold

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. 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.

What should businesses consider?

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 commonly 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 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 :

• a murder or suicide;
• 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.

At Edwin Coe LLP we have a team of specialist insurance solicitors acting exclusively on claims for policyholders. We are able to assist in reviewing your policies, advising in relation to their terms and in pursuing claims, including where policy liability has been denied.