As the Covid-19 Coronavirus continues to spread, it impacts almost every element of daily life. Many organisations will suffer from the precautions and impositions that have been put in place in order to prevent the spread of the Covid-19 virus.
The information below serves to explain how insurance will respond in the context of Covid-19, as we are aware that there is much uncertainty around this.
Policy wordings and conditions vary depending on insurer and, in some cases, which insurance product you have with a provider. Whilst we know the stance of some insurers absolutely, other insurers are less clear, and each potential claim may have to be discussed on its own merits.
Business interruption insurance covers organisations for either loss of profits, loss of income or additional costs incurred during periods when they cannot carry out their activities as usual due to an insured event, which traditionally has required damage to an insured premises – such as fire or flood. It aims to put an organisation back into the same trading position it was in before the event occurred.
This cover will usually only be triggered where property damage has occurred which is unlikely to be relevant in these circumstances.
Some policies may be extended to cover instances of interruption that are not a consequence of physical damage, but the availability of cover will be entirely dependent on the specific wording of your policy.
Unfortunately, coverage as a result of Covid-19 is likely to be rare. The UK Government has declared that Covid-19 is a notifiable disease, but it does not mean that coronavirus-related losses will be covered under a business interruption extension. In many standard contracts, there is no cover under the specified diseases extension as Covid-19 is not one of specified diseases covered.
Some infectious disease extensions are broader and do not specify the diseases but insist on them being notifiable.
If coverage is afforded, there is likely to be a sub-limit contained in the policy, this means that claim settlements are capped at an amount which is usually lower than the main business interruption limit of indemnity. Some policies require there to be an outbreak at the organisation’s premises or within a specified proximity of the organisation’s premises (e.g. 10-mile radius).
Some policies include a ‘non-damage denial of access’ extension. If your organisation is forced to close or is told to close by a local authority/cordoned off, you may be able to make a claim under this extension. It is important to note that a lot of policies require there to be an outbreak at the organisation’s premises or within a specified proximity (e.g. 10-mile radius) of the organisation’s premises for you to be able to make a claim. Again, this extension may be subject to a sub-limit.
Closure of your organisation’s premises by a Local Authority
Recent coverage in the media has suggested that insurance policies will kick in should the Government force closure of the premises. Unfortunately, this is not the case for most organisations. Amongst our own clients, this eventuality is only likely to benefit those in the Third Sector who have this particular extension.
The ABI released the following statement yesterday:
“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 businesses being closed by the Covid-19.
Standard business interruption cover – the type that 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 a claim, but this will depend on the precise nature of the cover they have so they should check with their insurer or broker to see if they are covered.”
Event cancellation insurance
If your policy includes communicable diseases and the government or a public authority forces you to cancel an event, you may be able to claim for irrecoverable loss of costs or revenues. Conditions will vary so individual policies would need to be looked at.
Coronavirus is now a standard market exclusion on new event cancellation policies, meaning it won’t be covered on new or renewed policies going forward.
Government support for business
The Chancellor has announced several measures to support businesses experiencing increases in costs or financial disruptions.
• A Coronavirus Business Interruption Loan Scheme will enable businesses with a turnover of no more than £41 million to apply for a loan of up to £1.2 million.
• For businesses with fewer than 250 employees, the cost of providing 14 days of statutory sick pay per employee will be refunded by the government in full.
• Additional £2.2 billion funding support for those small businesses that pay little or no Business Rates because of Small Business Rate Relief (SBBR)
• A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.
You can find out about this support in more detail on the Government website. The dedicated helpline number is 0800 0159 559.
A number of private lenders are also making funds available to small businesses impacted by Covid-19, including £2 billion from Lloyds Banking Group and £5 billion from NatWest.
Some of this assistance will also be available to social enterprises and some charities. A lot of Third Sector organisations are currently struggling due to an inability to utilise restricted funds to cover operating costs during this period of widespread shutdown. We await guidance from funders and government on any additional support for charities.
We hope that this helps explain the context of the current situation in more detail. If we can be of any further help, please contact us on 0191 917 0330 or at firstname.lastname@example.org.