Are you covered? COVID-19 – business interruption cover – tips for dealing with insurers

With effect from 5 March 2020, COVID-19 has been added to Schedule 1 of the Health Protection (Notification) (Amendment) Regulations 2020 (SI 2020/237), which means that it is now a notifiable disease, and since 11 March 2020 COVID-19 has been officially designated a ‘pandemic’ by the World Health Organization. Many businesses have insurance in place to cover business interruption and while COVID-19 is unlikely to be specifically named as an included incident, it may still be possible to claim under such policies.

A typical clause may provide:

‘Business interruption

In the event of interruption or interference of the business at the premises by…

• contagious or infectious illness or of restrictions preventing access to the insured premises…

The Insurer will pay you in respect of…

• the loss of trading profit due to the reduction in takings and the increase in the cost of working…less any sum saved during the indemnity period.’

Guidance on the gov.uk website – Guidance COVID-19 support for businesses states:

‘Commercial insurance

Most commercial insurance policies are unlikely to cover pandemics or unspecified notifiable diseases, such as COVID-19.

However, those businesses which have an insurance policy that covers government-ordered closure and pandemics or government-ordered closure and unspecified notifiable disease should be able to make a claim (subject to the terms and conditions of their policy).

Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers.’

Our 10 tips for dealing with claims under any insurance policy:

1. Policy details - you will need to obtain a full copy of your insurance policy and any schedules from your insurance company or broker and carefully review it. Not all business interruption policies will be triggered. Many apply only where there has been physical damage to property, although some policies do have extensions for notifiable diseases or for diseases that have been made notifiable by a local authority. The wording of your policy needs careful consideration.
2. Document trail – it is important, if you are covered, that you can prove what losses you have had as against previous years’ trading. Make sure you have proper records of all additional costs and expenses facing your business. For new businesses, businesses taking off, special arguments/circumstances may need to be put forward.
3. Utilise existing resources – it is not necessary to instruct forensic accountants to prepare any initial claim. Your accounts team may be able to calculate any trading losses by a review of previous years’ trading. It is advisable to look at least the previous three years to come up with a sustainable calculation.
4. Interim payments – once you have substantiated your claim, it may be possible to ask your insurers for an interim payment pending verification of the entire claim.
5. Voluntary refunds – be wary of making fee reductions or refunds voluntarily. Whilst these may assist with customer satisfaction, unless there is a contractual entitlement to a reduction then any offer which can be made should be approved by insurers in advance otherwise any claim for it may not be accepted under any insurance policy.
6. Argue your case – it is inevitable that insurers will push back on any claims. There will be careful examination of all policy clauses and the amounts claimed will also be heavily scrutinised and it may be argued that the losses claimed are the result of the wider crisis across the country.
7. Legal assistance – you may not be making progress with insurers accepting your claim and may need legal assistance to help move this forward and resolve matters. Legal advice may also be required on understanding your policy or challenging insurers’ decisions on coverage issues.
8. Financial ombudsman – can help consumers and small businesses with complaints against insurance companies, usually with a financial value up to £355,000.
9. Other losses – for those businesses that have shut down entirely as a result of Covid-19, and the general population are largely off the streets, there is clearly the prospect of an increase in malicious damage to property and/or theft losses. These may be recovered separately under any policy.
10. Notification – most policies require any claim to be notified as soon as an insured becomes aware of the issue, so we recommend proceeding with notification at an early stage.

Our firm is advising clients on various issues related to COVID-19. Our dispute resolution, commercial, commodities, and health teams can advise you on insurance issues. We also provide sensible, pragmatic advice to ensure long-term valuable commercial relationships are not irreparably damaged by disputes over cover in the coming weeks and months. For more information, please contact Fiona Parry and Iain Campbell (dispute resolution team).

For businesses considering the implications of coronavirus on their employees and for other articles on this topic, see our coronavirus hub.