COVID-19 – how effective is my insurance cover?
20th March 2020
The Coronavirus has been declared a pandemic by the World Health Organization, and it has also recently been listed as a 'notifiable' disease by the Government.
Businesses are faced with the challenge of mitigating the inevitable economic losses, and assessing the consequences of the potential inability to fulfil contracts. Along with numerous other measures, companies need to investigate the possibility of insurance policies, as an option for claiming losses.
Cover for notifiable diseases
Unfortunately, losses caused by pandemics are not often covered expressly under standard policies, as the risk has been difficult for insurers to price and understand.
Even where additional cover in respect of notifiable diseases has been purchased, it typically will not include Covid-19 within the range of diseases covered by the policy.
Other types of insurance cover
The most common types of covers that could be afforded by insurance policies for coronavirus-related losses and liabilities are traditional business interruption insurance, contingent business interruption insurance, liability insurance, as well as cancellation and abandonment insurance.
Business interruption cover generally has the prerequisite of physical damage or loss to the property, in order to recover losses caused by the interruption to your business. While it is clear that coronavirus cannot be categorised as a physical loss, it may be worth investigating whether loss of use of the property (as a result of Covid-19) might fall within the cover provided. One example is that the virus could cause loss of use for instance as a result of the inability to clean the premises.
Contingent business interruption
An extension to the traditional business interruption insurance, “contingent business interruption insurance” often covers areas such as business interruption due to damage to property of a customer or suppliers. Nonetheless, as above proving loss can be problematic.
One possibility worth exploring might be loss of use of the property due to action of civil authorities. For instance claims may be possible if authorities advise and/or legally require that properties should not be used.
Public and employer’s liability insurance
The surge in rates of infection could make business operators (travel operators, hotels, restaurants etc) vulnerable to claims of failure to protect against contracting the virus. There is a high chance of claims from employees, clients and members of public – however these are likely to be covered under public liability and employer’s liability insurance.
Insurance for cancellations/abandonment
In line with the Government’s and specialists’ guidelines for isolation and advice against gatherings, the number of cancellations has risen significantly. Cancellation insurance usually covers certain expenses and loss of profit, as long as the reason for cancellation is not excluded. These exclusion clauses are often quite wide and exclude avian, swine flu, quarantine, and restrictions of movement as a result of communicable disease. This means that you may not be entitled to compensation under this cover.
Need to notify
All policies will impose a stringent obligation, often with time limits, for you to notify insurers of circumstances that may give rise to a potential claim under the policy and non-compliance may well negate your cover. If therefore you have potential cover under your policy it is vital that you make a precautionary notification to Insurers as soon as possible.
How can Ward Hadaway help?
In these difficult times, insurance is a key protection. However, in dealing with a disease the likes of which has not been seen for over 100 years, insurers will be looking at the wording of your policy very carefully.
Our team is well placed to advise on difficult questions of policy coverage, how best to deal with your insurers, and any potential claims against your brokers.
For more information, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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