Business Interruption Insurance and COVID 19 - Full Time Cover

Business Interruption Insurance and COVID 19

Intended to protect a business against the loss of income related to disasters and other emergencies, business interruption coverage is typically included as part of a company’s commercial insurance policy.

With the now devastating effect of the corona virus for all to see, with concerning reports growing as to the duration and length of impact, many fears – particularly in the hospitality industry are whether establishments will be able to cope.

With news expected shortly of a government enforced closure, It is natural therefore that they look at insurance and their potential claim on business interruption.

Currently, it is worth noting for all business owners in retail and hospitality, The ‘Disease, Infestation and Defective Sanitation‘ Business Interruption Clause lists all those infectious diseases for which the policy provides cover. Coronaviruses are not currently included.
UK insurers use the precise approach of naming individual diseases rather than referring to a group because they can not cover risks they cant assess.

Business Interruption insurance generally excludes quarantinable diseases and pandemics such as COVID 19. This exclusion has largely come into force since 2004, on the basis that risk was deemed too high.
Much like with war, the impact of any major loss would be too much for the insurance industry to bear. Businesses would be priced out of insurance if generic policies extended to all nationwide and indeed global events. Pandemics and civil war are examples of this.
Indeed, one need only look at the effects of 9/11 and fears how the insurance would cope after this. Now terrorism is a standard exclusion that can be purchased at an additional premium.

It is important to note that these exclusions generally applies whether it is a government enforced shut down or not. So despite Government advice at present just being for public to avoid restaurants, pubs and theatres, even in the event that a nationwide ban is enforced, insurance will still not likely kick in.

If authorities order businesses in hospitality sector to close, Business Interruption insurance would still not kick in. However, looking at examples led by France, that is when we would expect to see a Government backed grant to support the industry in an exceptionally tough time. France have just announced a €300 billion national bailout. That is currently more than 20 times what the UK has given over to the economic impact of COVID 19.

There will of course be a number of corona virus related claims, particularly in travel insurance, and of course each potential claim in any situation needs to be judged on its merits – so please do get in touch with your broker or insurer.