Claiming for business interruption – a grey area
As well as increasing premiums, insurers are adopting a robust stance (and have done so since the outbreak began) to exclude Covid 19 from many policies and are also currently tightening the terms of their business interruption coverage to make sure anything related to the coronavirus pandemic is explicitly excluded.
The ABI issued a statement regarding Business Insurance on 17th March 2020 stating the following:
“Irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the Coronavirus.
“Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.
“A small minority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease. In this instance an enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased so they should check with their insurer or broker to see if they are covered”
This makes it clear that that the vast majority of businesses will not have purchased cover that will enable them to claim for business interruption because standard business insurance does not cover forced closure by authorities and is only intended to respond to physical damage.
Further examples of exclusions are one insurer has already introduced a blanket exclusion for any loss relating directly or indirectly to a communicable disease. Another has tightened the rules about “denial of access” cover — which applies when a policyholder cannot access their business premises — to exclude diseases.
Can you claim?
If your policy has an extension that covers forced closure by authorities then you may be able to claim, depending on the policy wording.
There has also been a rise in arguments over whether the damage caused by Covid19 can be considered as ‘damage to property’ albeit this is untested in the Courts.
In the case of denial or hindrance of access, if the cause of the hindrance is undefined “damage” that potentially gives wider cover than exists at the Insured Premises.
Insurers have an inbred aversion to ambiguity and the rush to introduce new wording suggests grey areas currently exist in insurance contracts. It always worth exploring those grey areas if the pay out on a claim would have a good financial benefit to your business.
If you would like to explore the options for your business, please speak with a member of our team at your earliest convenience by telephoning 01254 828 300 or email firstname.lastname@example.org