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The spread of the virus is beginning to affect every element of daily life and commercial activity. Many businesses will suffer from the precautions and impositions that will be put in place, and it’s fair to ask what help they could get from their business interruption insurers.
It’s very difficult to generalise, as so much depends on individual policy cover and the circumstances of each business. The best we can do is to outline some of the aspects needing careful analysis. First we’ll look at what we’ll call direct losses, then at those arising from the supply and sales chains.
Some – not all – policies may cover disruption to the business from its own circumstances. Since the SARS epidemic seventeen years ago, insurers have been reluctant to write disease cover, though some will insure losses by notifiable disease. To fit that definition it would be necessary for the Government to declare Covid-19 notifiable, and it has, as we write, expressed that intention.
Even then, a somewhat problematic legal precedent involving a Hong Kong hotel chain, could mean that losses would only be covered from the date of the declaration, and the indemnity period would not pre-date it. Lobby groups such as the CBI and FSB are expected to put pressure on the insurance industry to pay for losses incurred before a Government declaration.
Losses resulting from closure orders or other orders concerning public movement such as those currently in force in China and Italy are more likely to be covered under a BI policy. To what extent the UK Government or local authorities would be prepared to make such orders is hard to forecast, though on present showing, the official line is that it’s up to the individual or employer to make its own arrangements.
That means that losses from staff not coming to work, declining footfall from walk-in customers and lessened productivity are not necessarily recoverable by insurance, but each case will merit expert review.
Losses from causes affecting the business’s suppliers and customers are often insured as contingent business interruption, but again the operation of that cover will be dependent on what happened to the remote business that the policyholder is dependent on.
In general terms the events triggering a contingent BI claim will be the same as those triggering a direct one. As an example, a shortage of supplies from China could be covered, as the Chinese authorities have imposed many restrictions on the movement of goods and people, and if there’s cover for appropriate authority orders, that should be easy to prove. As should losses from the detention of goods in a port.
You can see from this that the Covid-19 risk is a fast shape-changer and we are watching it daily. We don’t want to sound too optimistic, as many policies will be rather more basic than outlined here. But every claim deserves some close attention, and Thompson and Bryan’s BI and policy interpretation experts will look at each enquiry to see if help from your insurer is possible.