Business interruption cover – does yours do what you need during this emergency?

The issue of business interruption, or BI, coverage has been raised across the media in recent days. The question is if that cover responds to the COVID -19 pandemic. Indeed, on 15 April the FCA wrote to insurers on precisely this topic, encouraging insurers - where claims are payable - to assess and pay those claims quickly.

The wordings of these BI covers are not standard, so a careful reading of your particular cover (if you have one) is necessary to determine whether or not a claim is payable.

That said, in the vast majority of cases this type of BI cover will not respond to claims arising from COVID-19. This is because they only respond to claims from a list of diseases set out in the policy and COVID-19 is too new to be included in such a list.

There are, however, a few policies that cover compulsory closure of business premises caused by notifiable infectious diseases. In those cases, as COVID-19 is a notifiable disease, BI loss arising as a direct result of the pandemic interrupting business may be covered.

There are also policies which include cover for non-damage (i.e. where there is no physical loss or damage to the property) denial of access to the place of business and this type of cover may also respond to the COVID-19 pandemic. Arguments have been raised in relation to covers which require an outbreak at the business premises or within a specified proximity which may give rise to problems of proof and causation of the loss.

Equally there are arguments that some BI extensions are only intended to cover losses due to closure of premises or restricted access due to a specific incident or occurrence happening within a specified radius of the insured premises and that this wording would not include the COVID-19 pandemic.

Both the initial assessment as to whether any claim may be covered and the quantification of this type of loss can be complicated.

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