COVID 19: INSURANCE

Many businesses will have insurance for business interruption and will be keen to know if this policy covers losses arising from the present national emergency.  This paper deals with two areas:-

  • Where the business has taken out insurance
  • Where the business provides insurance

INSURANCE

MAIN ADVICE:

  1. Each policy is different and Barnes Roffe are not insurance experts; the recommendation is to check your insurance policy as soon as possible with your provider or broker to ascertain if you are covered.
  2. Be aware of scammers offering insurance now and pretending to be from your insurers.
  3. Make sure any changes to working patterns do not fall foul of your current policy. Examples include:
  • Working from home  – office equipment covered and able to work from home?
  • Motor policies – split of business to leisure miles?

Detail

Policies are wide ranging and have multiple optional facets to them, main clauses cited in the press that may apply are:

  • Business interruption
  • Infectious disease specifically
  • Government closures

Policies usually cite “direct physical loss or damage” as a requirement to be triggered for business interruption so the initial government advices concerning not going to various locations were unlikely to constitute physical damage or loss under the Business interruption policy.

ABI states that a very small number of businesses are likely to be covered for infectious disease closures as this is usually a separate policy and not often taken up by customers.

Now that the government has closed bars, restaurants, gyms etc, there is more hope that some businesses will have the government closure clause included.

A good guide can be found under the Association of British Insurers: https://www.abi.org.uk/products-and-issues/topics-and-issues/coronavirus-qa/

This covers:

  • Travel Insurance
  • Business insurance
  • Insurance for schools
  • Home insurance
  • Motor Insurance
  • Wedding insurance
  • Income protection
  • Critical Illness Insurance
  • Trade credit insurance
  • Pensions and investments

The guide includes significant useful information and we have selected a few key points.

Does standard business interruption insurance provide cover for businesses not able to operate due to the effects of Covid-19?

  • Standard business insurance policies are designed and priced to cover standard risks and are therefore very unlikely to provide cover for the effects of global pandemics like Covid-19. This includes forced closure by the authorities. Businesses may have chosen to purchase cover that will specifically provide for business interruption arising from notifiable or infectious diseases. For certain notifiable disease extensions cover may apply if other policy conditions are met. However, this type of extension is not commonly included as standard. Furthermore, the likely costs to businesses of cover that would include more unusual risks – such as those posed by new diseases – would be prohibitive.
  • Businesses who are concerned about the impacts of Covid-19 should check the scope of their cover, and check with their insurance adviser or broker.

Does a ‘notifiable disease’ extension to business interruption cover my business for Covid-19?

  • Most notifiable disease extensions tend to cover specific diseases that will be named in the cover. If Covid-19 is not specified, then cover may not apply. 
  • Some notifiable disease extensions are more general and do not specify certain diseases. In these cases, business interruption cover for Covid-19 may apply if Covid-19 is present in the business.
  • If you are unsure about what your policy covers your business for, check with the broker you purchased the policy from or your insurer if you purchased it directly.

Are there any other extensions to business interruption that may provide cover?

  • Some coverage may exist if the business has purchased a ‘non-damage, denial of access’ extension to a business interruption policy. Again, purchase of these extensions tends to be rare and this is not generally covered under standard business interruption policies.
  • Generally, ‘denial of access’ cover applies to cordoned off areas and loss of trade resulting from a denial of access to the premises (e.g. as a result of a police cordon). If a business is forced to close or is told to close by an appropriate authority or is cordoned off, this could trigger a claim under a ‘non-damage, denial of access’ business interruption extension if the infectious disease cover is unspecified or if it includes Covid-19.

INSURANCE PROVIDERS

The FCA has published advice for both firms and consumers link here: https://www.fca.org.uk/coronavirus

An alternative link is:-

https://www.fca.org.uk/news/press-releases/fca-sets-out-expectations-general-insurance-firms-during-coronavirus-covid-19-pandemic

Key points are:

Operational resilience and business continuity

It is essential that all general insurance firms have plans in place to manage and mitigate the operational impact of coronavirus. More generally, we expect firms to:

  • Have sufficiently robust systems and controls to continue to operate effectively in a stressed situation with business continuity plans to manage this.
  • Have a Senior Manager responsible for business continuity and for managing the impact of coronavirus.
  • Act fairly, honestly and professionally in accordance with the best interests of customers.
  • Ensure that all customer communications are clear, fair and not misleading.

Firms should consider, along with other challenges, the impact of staff absences and the need to ensure staff wellbeing on continuity of service. Firms must identify how staff absence or inability to use business premises can be sufficiently mitigated to ensure critical services are provided to customers. Where firms identify gaps through their planning that will, or could, cause harm to customers, they should notify the FCA through their usual supervisory contact. 

Finally, the FCA has published some guidance about potential regulatory changes for its clients, this is ongoing but the link is below:

https://www.fca.org.uk/firms/information-firms-coronavirus-covid-19-response

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