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Does Business Interruption Insurance Cover Coronavirus?
Last modified:With the UK staring down the barrel of a public health crisis in the form of Coronavirus, we take a look at the implications to business and ask whether business interruption insurance is enough?
As with so much in the world of insurance, it’s complicated. This is not just because there are individual circumstances at play, different policy wordings to consider and different types of business interruption insurance, but also because there is yet so much unknown about Coronavirus itself.
With so much still unclear, so many variables and no clear precedence in place, the answer as to whether or not businesses will be covered by business interruption insurance, is going to come down to the nature of the claim, nuances in policy wording and the individual circumstances involved. One thing that is for certain is the crucial significance of individual policy wording – it really is so, so important to check the small print.
Contingent Business Interruption
Standard business interruption insurance is far more applicable when claims concern physical loss and tangible damage which disrupts trade, such as fire, theft or flooding. Less definitive off-premises events, such as COVID-19, which impacts on supply chains and work forces are far harder to define and tend to fall under policy extensions which cover contingent business interruption.
Examples of claims that might be covered by contingent business interruption include power-cuts, damage sustained by suppliers or lack of access to places of work due to things like extreme weather, industrial action, road closures etc.
According to the Chartered Insurance Institute, standard business interruption insurance provides cover for financial losses due to interruption caused by material damage to property. Therefore, it is likely that many businesses will be required to have taken out an optional extension in order to be able to claim for losses caused by Coronavirus. Extensions can cover things like vermin, defective sanitary arrangements, murder and suicide and crucially, notifiable diseases.
Notifiable Disease Classification
Up until now Coronavirus hasn’t been declared by the UK government as a Notifiable Disease, which is the definition many insurance companies require in order for businesses to be able to claim against business interruption policies. Whilst Scottish and Northern Ireland governments took this step back in February, the English government have only just declared Coronavirus a notifiable disease on March 5th, 2020.
Even with this classification now officially in place, decisions will still very much come down to individual policies, wording and circumstances. With standard business interruption insurance policies designed to cover standard risks, despite Coronavirus being declared a global health emergency by the World Health Organisation, and the financial cost projected to stretch to billions of pounds, many UK business could remain out of pocket due to the events surrounding COVID-19 being deemed as very unlikely.
If a business interruption policy does cover Notifiable Diseases, chances are high that each disease covered will be listed within the policy. Going forward it may be possible to specifically request cover against COVID-19, however existing policies will not list or cover Coronavirus.
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