The majority of business insurance policies include coverage for loss of earning, due to government closure orders. The coverage under business insurance is called “Business Interruption”.
The government put measures in place to help the economy survive, such as the furlough scheme, which provided 80% of staff wages, nevertheless, businesses were left with no provision to cover the total loss of their revenue.
An important part of responsible business practice is managing risk and although companies have Business Interruption Insurance (BI) policies in place, it is becoming progressively apparent that the larger insurance companies are not so keen to pay out.
Insurance Policies that offer Business Interruption Insurance
When selling BI, insurers usually provide a schedule of cover, alongside the comprehensive policy terms and conditions. The policy and the schedule formulate a contract amongst the insurer and the business where the insurer concurs to pay out a fixed amount based on evident insured events, occasionally termed “triggers” or “contingencies”.
Policy wordings differs extensively between insurers, with some providing cover in the event of forced closure by a relevant public authority and others providing explicitly for pandemics of certain types of disease to activate insurance policies.
As to which terms apply to any particular business, only a thorough inspection of the policy wording itself, and the schedule to the policy will provide answers.
To confuse matters further, some insurers purposefully pursued to omit certain SARS like diseases from the remit of their policies following the 2003 outbreak in Asia and some business-owners have now been told by their insurers that they have no remedy, even though they purchased policies that they thought fully covered them in the event of a pandemic.
Next, we examine some statements from larger insurance policies from their websites:
Aviva Business Interruption insurance and COVID-19
“Our Business Interruption cover is based on a specified list of diseases and has been since the SARS outbreak in 2003. These policies exclude business interruption due to new and emerging diseases, like COVID-19. Our policy wording clearly identifies the diseases we offer cover for and, in addition, highlights that new and emerging diseases like COVID-19 are not covered.
The current COVID-19 outbreak is therefore not covered under a significant majority of business interruption policies.”
Hiscox Business Interruption insurance and Covid-19
“The core Business Interruption cover provided by our business insurance policies responds to physical property damage at the insured premises resulting in the business being unable to trade. Hiscox’s policies do not include diseases linked to pandemics such as Coronavirus due to the difficulty of insurers being able to quantify the potential risk.”
Arch Business Interruption insurance and Covid-19
“Business Interruption cover provided by our business insurance policies is triggered by damage to physical property at the insured premises preventing the business from being able to trade. Our policies do not cover pandemic diseases due to the difficulties involved in predicting the potential risk.”
Ecclesiastical Business Interruption insurance and Covid-19
“We understand this is an uncertain and worrying time for organisations forced to close because of the Government’s measures to limit the spread of COVID-19.
Our business interruption insurance typically provides cover for loss of income through damage to buildings through events such as fire and flood, though in some instances it does also provide some cover following the occurrence of a pre-specified list of diseases.
COVID-19 is not included on the list of diseases covered by this insurance. This is because, in common with the majority of the market, our insurance policies are not designed and priced to cover pandemics. It would have made them unaffordable as it is simply not economically viable for an insurer to cover such widespread and unknown risks.”
Who is covered by Business Interruption?
Schedules of cover generally set out plainly whether BI is included within the terms of cover. Some schedules describe the cover as “Business Interruption Insurance”, whilst some describe it as “Revenue Protection”.
In this time of uncertainty, we are more than happy to check your business’ insurance policy wording to verify whether you are covered and entitled to make a business interruption insurance claim.
Insurance Policy Interpretation for Business Interruption Cover
There is an immense amount of case-law on how courts go about the task of interpreting contracts, but it is fair to say that although contracts are often interpreted based on their straightforward wording, judges are well adapted to bearing in mind contracts based on a degree of commercial “common-sense”, which does not always coincide with literal meaning.
Thus, business interruption coverage is a complex area of insurance law, though, and understanding the language of your specific insurance policy will be the first step in the process, which JMR Solicitors can help you with.
Legal advice in this matter is essential because with business interruption coverage, owners face challenges getting the compensation they deserve after suffering losses. The usual challenge starts with policy language limiting this coverage to losses caused by “direct physical loss of or damage to property.” Insurance companies use this provision to dispute that business closures related to the coronavirus did not suffer direct physical damage.
The FCA are seeking legal clarity on business interruption (BI) insurance during the coronavirus (Covid-19) crisis
The Financial Conduct Authority (FCA) are currently in the process of obtaining court declarations as part of a test case, aimed at resolving the contractual uncertainty around the validity of many BI claims.
The result of the test case will be legally binding on the insurers that are parties to the test case in respect of the interpretation of the representative sample of policy wordings considered by the court. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims, that can be taken into account in other court cases including in Scotland and Northern Ireland, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.
The FCA have published a preliminary list of insurance groups that are affected, which can be view here.
How to claim for Business Interruption through your Business insurance
Currently, there is an absence of legal framework for these claims should be made under BI policies, however, businesses considering making a claim should seek legal advice from a reputable commercial law solicitor so that they can check the wording of your particular policy thoroughly.
In some instances, the policy document will state the procedure for making a claim, including the steps you need to take to reduce losses, when to notify your insurer and what information to gather when making a BI claim.
JMR Solicitors can help your make Business Interruption claims on your insurance policy by going through the policy wording, then advising you on following the set procedure so that you are compliant. This will help avoid the court siding with the insurer in the event of a refusal to pay out.
Contact JMR Solicitors for Business Interruption Insurance Claims on 0161 491 3933 or email firstname.lastname@example.org