CORONAVIRUS - INSURANCE - 30.06.2020

Business interruption insurance - are you covered?

Some insurers are refusing to cover losses arising from the coronavirus pandemic so the FCA is seeking an urgent court decision to provide clarity. What steps can you take in the meantime to put the company in the strongest position possible?

Check for extensions

Standard wordings in business interruption (BI) policies don’t normally cover losses caused by infectious diseases. However, some BI policies include extensions which provide wider cover and are more likely to apply to losses relating to coronavirus. What should you be looking for?

Notifiable disease/infectious disease. On 5 March 2020 the government classified Covid-19 as a notifiable disease. This means that you may be covered if your extension refers to “notifiable diseases” in general and there has been a case in your premises or nearby. However, because the disease was unknown until recently, you’re unlikely to be covered if your extension is linked to a specified list of diseases - AXA and NIG are two insurers that have confirmed that Covid-19 will not be covered under their policies for this reason.

Non-damage denial of access/loss of attraction. This will normally apply if you are required to close your business on the advice of government or another statutory body. On 20 March 2020, the government required all restaurants, cafés, pubs, cinemas, etc. to close. If your business is in this situation, you may be covered depending on your policy’s exact wording. Tip. Don’t assume that your insurer will not pay out just because your policy is not clear on pandemics. RSA, Aegas and Zurich have all said that they will look at claims on a case- by-case basis.

What level of losses covered?

If you think your business might have a claim under the BI policy, it’s important to establish at an early stage what level of losses are covered.

Sum Insured. BI schedules usually record a business’s annual sales under a column headed “Sum Insured” or similar. You might think, therefore, that losses up to that level are covered. However, the level of BI cover is usually limited to a significantly lower level, either by reference to a specific sum or to the loss of income arising in a specified period, or both.

Other practical steps

Notify your insurer. You’re usually obliged to notify your insurer immediately of any event that may give rise to a claim. You should therefore speak to your broker or insurer as soon as possible, if you have not already done so, to ensure that insurers are put on notice of a potential claim. Tip.  Insurers should be notified even if you’re not sure whether the policy will provide cover or if it is not yet possible to quantify the losses suffered. Tip. If your insurer initially rejects your claim, you could try again once the outcome of the FCA’s court case is known (this is not likely to be until August 2020 at the earliest). As an alternative, you could complain to the Financial Ombudsman Service for Small Businesses (see The next step ) which has the power to settle disputes for smaller businesses and insurers.

Start preparing your claim. Even if you’re unsure if a claim will be successful, you should start to create and maintain the documentary evidence you will need to support any claim. The evidence required will depend on the wording of your policy. For a list of the likely evidence needed to support your claim, see The next step .

For a link to the Ombudsman and a list of likely evidence needed to support your claim, visit http://tipsandadvice-financialcontroller.co.uk/download (FC 12.10.09).

Check your policy to see if it has any extensions for notifiable diseases or non-damage denial of access. Even if it’s unclear whether you’re covered, make a claim to your insurer as soon as possible. If initially rejected, await the outcome of the FCA case to see if this provides the basis for an appeal.

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