Insurance Claims for Coronavirus (Covid-19)

Business Interruption (BI) can be purchased as a “standalone” insurance policy; however, the vast majority of BI policies are linked (as a chargeable extra) to your business policy. Where, for example, a business suffers a fire or flood, the primary claim generally concerns the reinstatement of the premises and the replacement of damaged contents and stock. However, during the time that the business is interrupted, profits will be reduced or, as often is the case, eliminated. The Business Interruption section of your policy is where any specific provisions relating to the loss of profit will be found. Please note that many business owners choose, (generally for cost-cutting purposes) not to include Business Interruption insurance. This can prove to be the ultimate false economy and a classic example of not being able to win the lottery because one didn’t buy a ticket. 

With COVID-19, since there is no material damage, the first challenge in establishing a BI claim is to determine whether there is a “trigger” for any cover to “come into play.” 

This will largely depend on whether there are clauses in the business policy extending the cover beyond those considered as “normal” consequences of material damage.

In some policies, Infectious Disease cover may expressly be provided. If not, other extensions to your policy, such as “Non-Damage Denial of Access” may be relevant. However, whether the appropriate protection is in place will be entirely dependent on the policy wording. This is the time when an in-depth analysis of the exact cause of the loss is required. To make it even trickier (we don’t want to!) that “exact cause” has to fit into the context of the policy’s specific wording. So often (in over 35 years in this industry) we find that Underwriters will try their damndest to put a different “spin” on the interpretation of their own policy wording should they believe that there’s a possibility of avoiding having to settle a claim. 

Cover for Infectious diseases can occasionally be found, as a sub-section of your Business policy. When an event has prevented or hindered access to your business premises, (and where no specific damage has occurred to your property), the cover may still be provided. This will be entirely dependent on the details and interpretation of the policy wording. A similar example might be a terrorism incident that is happening many miles away from your business premises, where all access roads to the insured business have been closed. 

Policies often limit the distance of the incident from business premises. We will argue with Underwriters (and win!) that, e.g. “as the crow flies” is an “unreasonable” way to calculate road distances.  

The duration of business interruption will also be an argument used by the Loss Adjusters acting on behalf of your insurers. Be in no doubt that insurance will be flooded with claims and they will be subject to the heaviest of forensic examination before any settlement is offered. We urge you to bear in mind that the Loss Adjusters employed by your insurance company are not “independent” specialists sent by your insurance company to help you formulate your claim. They are paid by your insurers to ensure that they settle at the minimum possible amount. Whether us (we hope so!) or any other Loss Assessor of your choice, do get these experts in claim negotiation to represent your company’s interests. Indeed, you will find that your insurance broker may be of help. However, be mindful that an insurance broker’s primary function is to find you the best possible policy at the most competitive price. They are not claim specialists but will undoubtedly give you as much help in the limited time they have available for, what for them, is a non-profit making activity. Further, many brokers give claims advice to their clients based explicitly upon what the Insurers themselves are telling them to say. Also, don’t forget that insurance brokers derive their income from insurers themselves.    

It may be of interest to learn that the vast majority of insurance claims that some 60% of  all claims that we handle are actually passed to us from insurance brokers themselves. 

Some policies provide cover for losses caused by specified diseases. However, COVID-19, as a new epidemic, is not specified because, of course, it was unknown at the time you purchased your policy. The medical definition or categorisation of the disease will no doubt give rise to disputes over coverage. Once again, and please mark our words, the Underwriters interpretation/spin of your policy wording is unlikely to be defined as you would want it to be described to get your claim settled. 

However, since businesses have taken out insurance covering the effects of infectious diseases in good faith, we would not be surprised to find considerable pressure on insurers to relax a strict interpretation of such clauses. Nevertheless, we don’t expect insurers to pay out unless they have to, or without government intervention. Even without that Government intervention, don’t expect these insurance claims to be “an easy ride”. 

Other policies refer to “notifiable” diseases. There might be difficulties in the case of new diseases, such a COVID-19, that does not become “notifiable” until some way into the period of loss.  

COVID-19 became “notifiable” in Scotland on 22nd February 2020, and in Northern Ireland on 29th February 2020. In England, the authorities only decided to make it “notifiable” on 5th March 2020. The wording of any policy will need to be checked carefully to establish which date acts as an active trigger for BI cover. If multiple triggers apply, calculating the amount of covered loss will give insurers every chance to ensure that the claim becomes complex and contentious.  

Even where broad coverage for notifiable diseases is provided, policies may include a specific list of diseases that are included. There is also the possibility that “catch-all” language including ‘or any mutant variant thereof.’ may come into force. 

Where cover for BI losses is accepted, there will inevitably be disputes over causation and the measurement of loss. When a business is forced to close or scale-down its operations, there will be arguments over the extent of the damages caused. Whether this is by the immediate effect on the business, rather than the impact in the broader marketplace, (e.g. the absence of customers) is open to interpretation. We can, with reasonable certainty, anticipate ‘wide-area damage’ type arguments being raised by insurers. 

We can only hope that businesses will be able to weather the storm “cashflow-wise” before relevant claims are processed. However, it is vitally important to understand that while a temporarily closed business will be able to make a claim, insurers will not release any payments before losses have occurred and are fully substantiated.    

Finally, please be aware that if a business ceases to trade and goes into liquidation, the business interruption section of the policy is deemed cancelled.