Business interruption insurance: are you covered?

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Over the last few months, many businesses will have dug out their business interruption insurance policies in the hope that it could help save their organisation from some of the damage caused by Covid-19.

Business owners who have been paying for business interruption insurance may presume that this will automatically recover any revenue lost as a result of its closure or reduction in operation. After all, it’s not their fault that their business has been interrupted by events beyond their control.

However, according to a recent article in The i newspaper, many small businesses have discovered that their business interruption policies do not cover the current situation. A huge blow, especially for those who hit the hardest, such as those in the hospitality or travel industry.

So is it clear for business owners as to whether an insurer will cover them for Covid-19 related claims?

What is business interruption insurance?

Business interruption insurance provides cover against the loss of income to an organisation as a result of an inability to trade as normal due an unexpected event.

It is different to property insurance in that a property insurance policy only covers the physical damage, e.g. from a fire. A business interruption policy covers the profits that would normally have been earned. It’s designed to put a business in the financial position it would have been in if no loss had occurred.

What is covered by business interruption insurance?

As with any other policy, you will need to read through the documentation of your policy carefully and look out for the ‘extensions’ that your business insurance policy covers. These clauses are:

  • “Specified” or “notifiable disease”
  • “Non-damage denial of access”; and
  • “Loss of attraction”

Notifiable disease

On 5th March 2020, Covid-19 was added to the list of notifiable diseases. Some policies provide cover for business interruption caused as a result of a contagious diseases occurring.

Non-damage denial of access

This is when access to premises is hindered or prevented by something other than physical damage.

Loss of attraction

This clause intends to provide cover when specified events have a negative impact on revenue. For example, if an event causes a fall in the number of customers or potential customers visiting the business.

My business interruption insurance doesn’t cover Covid-19. What can I do?

If you believe you have a valid claim, contact your broker and submit a claim as soon as possible. This is to ensure that you meet the policy conditions even though your insurer has indicated that your claim will not be paid.

A claim was recently issued at the High Court seeking declarations regarding the wording of various business interruption policies. This claim has been expedited by the Financial Conduct Authority given the urgent need for the Court’s guidance on whether Covid-19 related claims are covered by a number of different policies.

The case involves policies issued by major insurers in this sector of the insurance market, including QBE, RSA and Hiscox. We expect the decision to be made very soon and will issue a further update once we know more.

How we can help

If you’re uncertain as to what to do next regarding your business interruption policy, get in touch. For a complimentary, no obligation chat, call our expert commercial litigation solicitors on 0117 325 2929 or fill out our online enquiry form.


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