On 5 March the UK Government declared Covid-19 a notifiable disease. This action was intended to help businesses with their insurance claims for disruption.
As always, policy coverage will of course depend on individual circumstances and the specific wordings of the policies.
Coverage for both business interruption (BI) and contingent BI is commonly dependent on there being damage to property such as a fire. (In contingent BI, the property belongs to someone other than the insured such as the supplier.) There may also be pollution or contamination exclusions which may include certain diseases.
While notifiable disease coverage is the first BI trigger that insurers consider, it is not necessarily the case that contingent BI might apply. The situation is more complicated than first appears; this article explains why.
Policyholders may, however, have more specialised supply-chain insurance or extensions which may meet the needs of this situation, providing contingent BI cover triggered by non-physical damage events such as infectious diseases or denial of access.
There are other aspects. The police is warning of cyber-criminals cashing in on topical news stories to send emails asking for sensitive information or including malware; see earlier article here.
Employers, directors and officers and the hospitality industry may also face liability claims for exposing others to the Coronavirus. If a company's plans are shown to be weak compared to their peers (e.g. if most companies close canteens to avoid large gatherings of people but a few do not) then it may have failed in its duty of care to employees.
In light of the FCO advice, a clear distinction needs to be drawn between travel to destinations where there is advice not to travel and a more general reluctance to travel due to the situation as a whole. While the latter concerns are fully understandable, cancelling a trip outside countries with all but essential travel notices is unlikely to be covered. Where there is advice not to travel, a key factor will be the date on which the warning against travel was made. In reviewing any policy, care should be taken to consider any extensions which may cover epidemics.
The disease outbreak has resulted in a number of cultural, music and sporting events being cancelled. Event cancellation and disruption insurance will need to be considered in light of the FCO travel restrictions and any wider government restrictions at home. Careful review of exclusions or extensions relating to infectious diseases will again be necessary.
Those businesses considering buying cover now are likely to see the Coronavirus specifically excluded but that does not mean that an infectious diseases extension is not valuable against other diseases and they should have detailed discussions to ensure that appropriate cover is obtained and well understood.
Keep a record
It is also time to get a clear understanding of insurers’ expectations and requirements for documentation when submitting a claim for a covered loss. According to Paul McVey, a managing director at Marsh, discussions with claims' advisors and insurers should include details of:
- infected people (mindful of potential breaches to health information privacy regulations);
- affected suppliers who are unable to deliver on their contracts and/or proof of government-mandated closures;
- records of visitors which could become useful if the virus is identified on the premises;
- declining business activity by analysing variances between forecast and actual revenues, including footfall;
- additional costs incurred from mitigation activities and their effect on profit margins such as cleaning and disinfecting the premises, overtime pay to make up for production losses, and media or communications campaigns to inform the public or employees.
See details further here.
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