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 had presumed 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, many small businesses discovered that their business interruption policies did not cover the damage caused by the coronavirus pandemic. A huge blow, especially for those hardest hit, such as those in the hospitality or travel industry.

A review of business interruption insurance policies

After this came to light during Spring/Summer 2020, it was agreed that policy wordings needed to be reviewed urgently. The Financial Conduct Authority (FCA) expedited the claim, asking for the Supreme Court to provide guidance on whether Covid-19 related claims are covered by various business interruption insurance policies.

The case involves policies issued by the major insurers in this sector of the insurance market: QBE, Royal Sun Alliance and Hiscox, amongst others.

In January 2021, following the Supreme Court’s judgment, the FCA ruled that these “roadblocks to claims” should be removed and that they would work with insurers to ensure a faster pay out for business interruption claims going forward.

Insurance policies will now have to be reviewed and amended for business customers, and the FCA has advised that any customers who made claims will soon be contacted by their insurer to discuss what this latest judgement means for their claim.

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 that you have a valid claim, you should 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.

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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