Can I use my Contingent Business Interruption insurance to make a claim?

You will claim a pro rata’d amount of 80% of salary, based on the proportion of hours not worked out of the employee’s normal working hours (their “usual” hours).

There are 2 ways to calculate an employee’s usual hours, depending on whether they have fixed or variable hours/pay:

• For those with fixed hours/pay, you take the number of hours worked in the pay period before 19 March 2020.
• For those with variable hours/pay, you take the higher of:

1. the average number of hours worked in the tax year 2019 to 2020 or
2. the corresponding calendar period in the tax year 2019 to 2020.

If employees are paid per task or piece of work done, you should work out the usual hours for these employees in the same way as for other employees who work variable hours, if possible.

When you calculate the usual hours, you should include any hours of leave for which they were paid their full contracted rate (such as annual leave) and any hours worked as overtime (but only if the pay for those hours was not discretionary).

The government has also confirmed it will match donations to the National Emergencies Trust as part of the BBC’s Big Night In fundraiser on 23 April – pledging a minimum of £20 million.

To respond to the crisis businesses might need to exchange information to a greater extent than they would usually. They might need to discuss capacity and to coordinate supply chains (both upstream and downstream). They might need to purchase or sell jointly to ensure vital supplies are maintained. In general agreements or collaboration which:

• Avoid a shortage, or ensure security, of supply
• Ensure a fair distribution of scarce products
• Continue essential services
• Provide new services such as food delivery to vulnerable consumers

The CMA sees only limited circumstances in which a full refund would not be given. The CMA accepts that where public health measures prevent a business from providing a service or the consumer from receiving it, the business may be able to deduct a contribution to the costs it has already incurred in relation to the specific contract in question.

This view reflects a relatively complex area of law under which parties are released from obligations under a contract if performance of that contract becomes impossible or illegal. This is called “frustration” of the contract. Under a law passed during World War II, a party to a contract that is frustrated who has incurred expenses is permitted, if the court thinks fit, to retain an amount up to the value of those expenses out of any money they have been paid by the other party.

The CMA’s view, however, is that this will not happen often, and that deductions from deposits will be limited.

The Cabinet Office has published a helpful Procurement Policy Note (“PPN”) on relief available to suppliers due to Covid-19 (available here). This can include making advance payments to suppliers, if necessary. The PPN sets out actions that public sector bodies should take (until at least 30 June 2020) to ensure continuity of service and to ensure that its suppliers can resume normal contract activity once able to.

The actions public sector bodies should be taking include:

• Informing its suppliers (that they believe are at risk) that they will continue to be paid as normal until the end of June 2020 (even if service delivery is currently interrupted). Risk might include supply chains collapsing and/or significant financial implications for a supplier
• If a contract involves a payment by results mechanism, basing payments on previous months (e.g. the average monthly payment over the previous 3 months), and
• Ensuring that invoices submitted by suppliers are paid immediately to maintain cash flow in the supply chain and help to protect jobs.

If you are a supplier to a public sector body, you must act transparently and on an open-book basis, making cost data available to your public sector clients. You must also continue to pay your employees and subcontractors / suppliers. Suppliers to the public sector must not expect to make profits on any undelivered elements of a contract. The PPN makes clear that, should suppliers be found to be taking undue advantage, or failing to act transparently, a public sector body can take action to recover payments made to that supplier.

The PPN requires public sector bodies to urgently review their contract portfolios and take steps to support suppliers who they believe are “at risk”. However, no definition of “at risk” is given in the document.  We would suggest that if you are a supplier and you have yet to hear from a public sector client, you should seek to get in touch with them as soon as possible, particularly if you have concerns about your supply chain, staff retention and/or are experiencing financial difficulties currently. Given the requirement for transparency, you may be required to provide evidence, so it may be helpful to have any relevant documentation ready to send, if necessary, as this may help ensure a decision is made by the public sector client more promptly, particularly as the public sector body may have a number of contracts to consider.