Many businesses will have insurance to pay losses when their business is interrupted by an unforeseen event. This extends in some cases to illness and we set out below some areas for businesses to consider as they grapple with the current unprecedented challenge of coronavirus.
Business interruption insurance (BI)
This cover might be a free-standing policy or it might be a particular section included in your general business insurance. You will need to check your policy schedule to see whether that section is operative.
Whilst every policy is different, a typical BI cover will insure lost profit flowing from actual damage to business premises. The more normal claims would be for lost profit whilst a business closes for repairs after physical damage caused by fire or flood. The BI cover tides the business over until it is back in operation and is usually time limited, perhaps for 12 months.
But some policies also have cover for losses caused by specified illnesses. If, for example, your business has to close as a result of an illness such as coronavirus then you should check your cover to see whether you have BI and what the terms of that cover are.
It is obviously unlikely that the cover will refer to coronavirus or COVID-19 itself, but coronavirus became a notifiable disease on 3 March 2020 in England and Wales and if you have cover for ’notifiable diseases’ then losses from that date might be covered.
Another type of cover that might become relevant is cancellation cover. Some businesses that put on events have this cover, more usually to insure against cancellations due to extreme weather. These policies sometimes exclude losses caused by government intervention, in which case there may be no cover for coronavirus losses, but much will depend on the policy wording and the date of cancellation.
Trade credit cover is also an area to consider. If payments are not made but the debtor relies on ‘force majeure’ (events beyond their control) to avoid payment, the cover may not respond but it is again worth checking the terms of your cover.
In the longer-term liability cover may also become relevant if claims are made by employees or customers where businesses are said to have failed to protect them from the risks of coronavirus.
Every policy is different and if your business has suffered loss arising out of the pandemic then we recommend urgently reviewing all policies and notifying claims, even as a precaution, soonest. Late notification could give insurers a reason to decline a valid claim.