We have, understandably, been hearing growing concerns from our policyholders with regard to Business Interruption as the outbreak of COVID-19 rapidly takes hold throughout the UK. Many businesses are considering the potential impact on their business operations if they are forced to temporarily close - or if a precautionary decision is taken to do so - as a result of the outbreak.

Business Interruption generally covers gross profit or loss of income following a physical loss at the business premises, e.g fire and flood. However, many policies also include additional extensions to cover losses which fall outside of the 'material damage proviso', e.g failure of public utlities, interruption to suppliers and customers, denial of access and of course the occurance of 'notifiable diseases' to name a few.

These additional extensions will usually have their own specific conditions, inner limits, deductibles, time excesses and contract wordings which must be met in order to trigger policy coverage.

Please note that the specific policy wording for each insurance policy can be very different in it's approach to 'notifiable diseases' and it is this wording which will determine whether any such closure is likely to be covered under conventional business interruption policies.

Specified Basis

Since the outbreak of SARS in 2003 it has been common practice in most modern insurance policies that include the ‘Diseases & Illlnesses’ extention to cover diseases on a 'specified' basis only. This means that cover would only trigger if one of the specifically noted diseases/illnesses in the policy were to cause your business premises to shut. On this basis, policies exclude business interruption due to new and emerging diseases, like COVID-19. Unfortunately, even after the Government has added COVID-19 to the list of ‘notifiable diseases’ on the 5th March 2020, it was not a specified disease with many of the insurers, therefore, in this circumstance coverage would not apply. We have been advised by some of the leading UK insurers that they cover diseases on a 'specified' basis (the precise approach of naming individual diseases rather than referring to a group) because they cannot cover risks that they cannot assess.

Generalised Basis

There are some policy wordings, often older and less recently updated wordings, which refer to a general class of notifiable diseases and do not cover diseases on a specified basis. Indeed, no policy will specifically cover COVID-19 but where a policy offers cover on a generalised basis and not on a specified basis, then cover may trigger. It is important to note, however, that even where cover may apply, certain criteria will need to be met.

Cover under some Business Interruption policies only applies where the disease has been detected AT the premises that are to be closed, whereas others only require there to have been an order from a competent authority that the premises be closed as a result of the disease. This can be significant because in many cases businesses will be closed as a precaution. In those situations, many businesses will not benefit from cover.

Many businesses are considering a temporary closure as a precaution against the further spread of COVID-19. Whilst that may be a prudent precaution to take, most policies will not cover losses arising from precautionary closure or from a closure arising from the fear or threat of disease. In the majority of cases, an order to close from a public authority is a pre-condition for coverage under the policy. Equally, a decision to require individuals who may have been exposed to COVID-19 to self-isolate will not be covered by most policies.

Please contact us in the first instance for clarity on your policy wording (as they all generally differ) and we will do out best to keep you updated with any insurer changes and announcements whilst we regularly monitor the latest updates and advice from the Government. Please note that further help and information for employers and businesses can also be found at https://www.gov.uk/government/news/coronavirus-covid-19-guidance-for-employees-employers-and-businesses