The effect of the Covid-19 pandemic on businesses has been stark and will in some cases be catastrophic.
They may therefore look for some assistance in their insurance policies.
The FCA who regulate Insurance companies stated in a recent bulletin:
“We expect Insurers, given the unprecedented impact of Coronavirus, to be aware of the circumstances that their customers find themselves in.”
Businesses therefore may reasonably expect to have some form of cover in a Business Interruption clause in any Insurance Policy.
The issue faced here is that the most basic Business Interruption cover is dependent on physical loss of damage which would not cover a claim arising from Covid-19.
Some businesses may have extended Business Interruption cover which would cover specific events including diseases but given that Covid-19 was not in existence when most of those Policies were written again it is unlikely that they will provide cover.
Business Interruption clauses may include cover for infectious diseases and it’s likely that Insurers will dispute that Covid-19 falls into such clauses irrespective of the Government order to close down. Insurers may question whether or not the cause for closing down related to the Government Order as opposed to some other reason for closing down a business. There is no standard infectious disease cover as such the wording will need careful analysis. It is unlikely to specifically refer to Covid-19. However, such clauses are not usually standard and as such would benefit from careful review. Particularly where the guidance from the FCA is for Insurers to be aware of their policyholders circumstances and the requirement to treat customers fairly.
If a business has purchased a non-damage extension to it’s policy this is certainly something that can be explored with Insurers who will be required to treat their customers fairly to see if it provides cover.
Even if a business does not have Business Interruption cover but has been closed down due to the Government order it may be possible to take advantage of any force majeure clauses in their contracts. Again such clauses will require careful examination. Force majeure clauses might not refer to epidemics or a pandemic but are likely to refer to an act of Government which has been in existence since 23 March 2020.
Businesses also need to review their Policies concerning their property particularly if they are now unoccupied. It is hoped that Insurers will be flexible about their period of unoccupancy specified in any Policy document.
Once the pandemic is over many businesses and in particular their Directors may face tough questions about the steps they took to protect the business and as such if a D&O Insurance Policy is held it may provide useful protection.
Businesses are also facing challenges with employees now homeworking. It is possible that claims may arise from employer’s liability, occupational health and safety matters which would not ordinarily be covered by insurance since the work is not being carried out in the work place. In light of the FCA bulletin we would expect Insurers to be more flexible regarding these matters. Similarly the FCA has also raised potential problems with Household and Motor Insurance Policies given that many people are now being asked to work from home but without the conventional policies to cover them.
A final issue potentially facing businesses is the likely increase in fraud which inevitably comes with periods of crisis. They should there be checking the policy to see whether if they are a victim whether they have insurance cover.
Our insurance team has significant experience in considering insurance polices and would be more than happy to review your policies or challenge any refusal by insurers to provide cover for any claim you may make.
For more information on any of the above, or how we can help you, please contact Tom Whitfiled, or call 0191 232 82345.