COVID-19 & Business Interruption
Owens McCarthy has a team that are dedicated to complex Business Interruption claims. In addition to this, all our qualified Assessors are experienced in the technically demanding task of policy interpretation. The expert handling of Business Interruption claims is part of our core offering to Policyholders (& their Brokers).
Regardless of whether (or not) the Government has issued orders specifically or effectively closing a business – or an entire sector of the economy – most businesses will not have purchased any cover that might enable to make a claim to compensate them for this (COVID-19) interruption to their business.
A great many Underwriters will try to make the case that the COVID-19 event is illustrative of what is known as a fundamental risk. The losses arising out of such causes may be catastrophic in dimension and most Insurers will be careful to protect themselves against so wide and massive an exposure as presented by such events.
You will all be aware of the ‘material damage’ proviso as being the ‘trigger’ for any business interruption claim. As the ABI in the UK have pointed out: “Standard business interruption cover does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.”
There is no material damage ‘trigger’ in respect of COVID-19 losses.
A small minority of firms may have purchased an extension to their business interruption insurance to provide cover for closure due to an infectious disease.
Nevertheless, one-size-does-not-fit-all. Having due regard to our recent review, it is fair to say that each and every policy wording is different. Whilst there may appear to be cover for interruption caused by, for example ‘infectious disease’ this is not the same as saying, definitively, that there is the basis for a claim.
Common Issues – Health Warning: every policy wording needs to be read, in full, no assumptions can or should be made!
- There may not be any ‘infectious’ or ‘notifiable’ disease non-damage business interruption extension to the policy. OUTCOME: there is no basis for a claim.
- The policy in question may be based upon a specified list of diseases and these policies – by their very nature – exclude business interruption due to new and emerging diseases, such as Covid19. These policies will clearly identify the diseases that are covered, examples might be Anthrax, Leprosy, Plague, Rabies…. etc. Again, the key takeaway is that COVID-19 is so new a phenomenon that it cannot have been written into any of these SPECIFIED DISEASE policies. OUTCOME: The current Covid-19 outbreak is therefore not covered under a significant majority of specified diseases business interruption policies.
- The policy may provide an extension under the business interruption section for ‘notifiable’ or ‘infectious’ diseases. COVID-19 is certainly a ‘notifiable’ disease per the legislation/regulations. However, the cover may be restricted to the closure of the business where there has been an OCCURRENCE of such a ‘notifiable’ disease at the PREMISES. OUTCOME: in the absence of demonstrable proof of an occurrence of an outbreak of the disease at the premises – and that the closure is because of this occurrence – the losses will not be covered.
- Like the ‘trigger’ at item 3 above, the policy cover may be somewhat wider referring (perhaps) to an outbreak of an infectious disease at the premises or within 1/10/25 miles of same. Such a wording presents a difficulty for the Underwriter, as, on the face of it, there would be appear to the basis for a claim. The question will be whether the closure was imposed due to: 1) the ‘outbreak’ within 25 miles or 2) as a result of the Government’s desire to ‘slow’ the spread of the highly contagious COVID-19 disease. OUTCOME: the pathway to cover still isn’t clear with this type of wording and we have already had one Insurer refuse to take notification of a loss on the basis that the ‘blanket government closure’ was never intended to be covered by the policy. We have challenged that Insurer on their wording and will continue to do so.
- In every policy, there may be diseases that are specifically EXCLUDED such as: SARS, swine flu, avian flu, AIDS etc. Each policy needs to be checked for these. We have seen a policy that excludes ‘atypical pneumonia’. COVID-19 causes atypical pneumonia. For your information, The World Health Organisation announced on 11 February 2020 that “COVID-19” would be the official name of the disease. While the disease is named COVID-19, the virus that causes it was named SARS-CoV-2. OUTCOME: Our position, where there is a SARS exclusion will likely be that this a ‘new’ SARS and hence not excluded.
- Even if/when some level of cover can be established, care needs to be taken in reading the policy to find any inner limit of liability or a limit upon the indemnity period. Many disease extensions are limited to a three-month period and few provide full cover for gross profit annualised.
In every case, the policyholder should react to the current crisis in the manner of a ‘prudent insured person or businesses’.
In the first instance, we are ready to respond to prospective claimants by reviewing the extent of policy cover provided by the actual policy. Thereafter we can discuss our prospective involvement on the policyholder’s behalf and show them where there may be cover that might respond to their loss.
Regardless of any further restrictions on the movement of people, all our Assessing team have been provided with the full capacity to work remotely or from home.
Our collective expertise always remains available to claimant Policyholders and Brokers alike.
We are resourced and ready to work through the challenges that this crisis has created. If you (or your clients) require immediate professional and compassionate advice, please do not hesitate to contact our Business Development Director, Eamonn Downey on 087 284 6431.