24 September 2020
There is no doubt that a significant number of businesses across the UK have suffered financial losses to varying degrees as a result of the Covid-19 pandemic and the subsequent Government imposed lockdown forcing closures of non-essential trades. As a consequence, businesses have looked to their Business Interruption Insurance to seek indemnity to discover that their claims have been rejected and there is no cover.
Why are claims being rejected?
Business Interruption Insurance is a cover that primarily provides insurance coverage to protect a policyholder for any loss of income for a period of time as preset at inception of cover with a period of indemnity (normally no less than 12 months) as a result of a physical peril (e.g. Fire, Flood, Theft, Impact etc.) that has occurred at the business premises. Any insurer settlement could include a combination of payments towards standing charges that could not be met because the business is unable to trade or loss of gross profit or paying for the increased costs incurred to recover the loss of income. The sum insured should be sufficient to suitably provide indemnity in the event of a 100% loss of insurable Gross Profit for the indemnity period selected. In addition to this primary cover, it is possible to add extensions to your insurance cover which should be tailored to the potential insurance risks your business could face. These extensions will normally have a lower inner limit and will provide cover for a loss of income when there has been a physical loss but not at your premises. Examples of these are as follows: -
- Denial of Access to your premises as a result of a physical loss at a neighboring property causing the relevant authorities to close all access to your premises resulting in you being unable to trade or only partially trading.
- Loss of Public Utilities (Gas/Electricity/Water/telecommunications)
- Loss at Suppliers Premises
- Loss at Customers Premises
Contagious Notifiable Diseases Extension
Another extension that many businesses will have in their insurance programme is a “Contagious Notifiable Diseases Extension” which is were many businesses were hoping their insurance may respond to this current crisis. The reality is that unfortunately, all insurers cover for this extension is on a specified disease basis only including known notifiable diseases e.g. cholera, legionnaires, measles, rubella etc. and these have to be as a result of an outbreak at your premises or in some instances in its close proximity. As Covid 19 is a virus that was only discovered in late 2019, none of the “Contagious Notifiable Diseases Extensions” included this virus as a specified disease even though it was classed as a notifiable disease by the UK government in March 2020. Another disease that is not included in many insurers cover is 'Severe Acute Respiratory Syndrome' (SARS virus) which came to light in the early 21st century. The future outlook for insurance indemnification is not good either as I am afraid insurers will not be amending all existing extensions to now include Covid 19 or SARS, the reality is that now the virus is known, that they will be changing your insurance coverage to specifically exclude any loss as a result of it.
