COVID-19 and Business Interruption

In the wake of constant reminders to practise social distancing as a result of COVID-19 (Coronavirus), the government’s announcement advising people against going to places such as restaurants, pubs and theatres have left businesses in a state of uncertainty. The advice, though not compulsory, is clear in its intentions that businesses are being left with little choice but to close off premises to public. Since business interruption is inevitable and beyond their control, the question left for business owners is whether they can claim for insurance cover.  

In short, this will depend on the wording of your insurance policy. Until the government coerces the closure of premises, unfortunately, it is unlikely that the current business interruption is covered by insurance.

The relevant risk may be referred to as ‘non-damage denial of access’ under your insurance policy where loss or damage has arisen from interruption of or interference with business in consequence of closure of premises by a statutory authority. However, firstly, this requires the decision to close to be made by a statutory authority and not by the business owner. Secondly, such cover may exclude loss arising from business interruption caused by the closure of any essential suppliers to your business such as utilities suppliers. To emphasise, you will need to refer to the specific wording of your policy.

You may wish to review your policy wording from the following angles to better understand your insurance policy in the circumstances and also to note the following limitations that you may find:

1.  Policies may have a defined list of specified diseases covered under the policy, in which case, COVID-19 would obviously not be covered. However, you may wish to double check whether your policy uses more general wording instead to cover pandemics or epidemics.
2. Your policy may include cover for losses caused by a “notifiable infectious disease”. However, such policies will often also exclude certain diseases such as SARS or foot and mouth disease. Again, it is important to note the particular wording of your policy. Coronavirus became a notifiable infectious disease in England and Wales on 3 March 2020. However, please note, therefore, that any losses caused before these dates will not be covered.
3. Parameters may have been put in place to only provide cover for loss or damage arising out of diseases at the premises themselves or within a specified proximity to the premises and/or possibly leading to a loss of attraction to your premises. This is, however, unlikely to include the wider risk of infection within a region or country.
4. Whilst policies that specifically define in great detail the events that could give rise to an insurance claim would leave little scope for claims in respect of a novel coronavirus, your policy may separately cover losses arising from other factors, such as in relation to suppliers or essential personnel in your business, which may be a question of fact not necessarily caused by any specified event. If so, you may be able to make an insurance claim for those losses.

On the presumption that you are able to claim insurance cover on any of the issues mentioned above, you will also need to refer to your limit of indemnity and any excesses and/or capped liability specific to a category of loss in your policy.

Please note that we do not have any expertise in insurance matters and this information is provided for general knowledge only.  Should you have any queries, specific advice should be sought from your insurance provider in the first instance and you must obtain any necessary legal advice from an insurance specialist.